Asia Pacific Equity Research

07 January 2016

Overweight
Ginko International 8406.TWO, 8406 TT
Price: NT$408.00
Growth continues with better quality from cashflow; ▲ Price Target: NT$480.00
Reiterate OW with new PT NT$480 Previous: NT$435.00

We still see 10-15% structural growth p.a. for the China contact lens market Taiwan
and Ginko in coming years. In addition, its cash flow has improved Consumer, Cyclical and Property
significantly in 2015, and the cash conversion cycle should improve Andre Chang, CFA
AC

gradually, meaning growth with better quality vs previous years. We roll W W W

forward our PT date to Dec-16 from Jun-16, and raise PT to NT$480 (18%
potential upside), at 23.5x 2016E P/E (0.5 STD below avg. of 26x since
J.P. Morgan Securities (Taiwan) Limited
listing, and at high-end vs Taiwan SMID champions). Ginko offers similar
valuation but better long-term growth vs St. Shine (1565 TT, N), in our view. Bill C Lin
W
W
 China contact lens market growth will last. Despite concerns about a
J.P. Morgan Securities (Taiwan) Limited
China consumption slowdown, the import value/volume of contact lens,
Leon Chik, CFA
the best demand indicator in our view, still grew 24% in 11M15, in line W
with the average over 2012-14. According to our estimates, the China W
contact lens market size was only >450m pieces in 2014, vs 386m in J.P. Morgan Securities (Asia Pacific) Limited
Taiwan and over 3b in Japan. With a significant gap in population and
Price Performance
expected increases in income levels, we conservatively forecast the 500
market and Ginko to grow 10-15% in coming years. Ginko has worked 450

through the impact of the government crackdown on illegal channels, NT$

400
350
with 13-17% sales growth yoy in September to November. We forecast 300
13%/19% sales/EPS growth in 2016E, respectively. 250
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16

 Growth with better quality in terms cash flow this time. Ginko 8406.TWO share price (NT$)
TSE (rebased)
generated NT$1.1b of operating cash flow over the past four quarters, YTD 1m 3m 12m
Abs -6.2% -2.9% 20.9% 30.6%
better than any single year from 2011-14 or even aggregated cash flow Rel -0.4% 4.2% 28.5% 44.1%
in those years. In terms of free cash flow, the gap is even wider: near
NT$700m inflow in the past four quarters vs over NT$3b outflow in
2011-14. We expect this will improve further on the cash flow and cash
conversion cycle, which we forecast to improve from nearly 500 days by
end-3Q15 to just over 440 days by end-2016. From this angle, 10-15%
sales and 15-20% profit growth now is not inferior to the 12-30% sales
and 12-40% profit growth in 2010-13.
Ginko International (Reuters: 8406.TWO, Bloomberg: 8406 TT)
NT$ in mn, year-end Dec FY12A FY13A FY14A FY15E FY16E Company Data
Revenue (NT$ mn) 3,806 4,879 5,783 6,126 6,911 Shares O/S (mn) 93
Net Profit (NT$ mn) 1,052 1,420 1,447 1,586 1,884 Market Cap (NT$ mn) 37,781
EPS (NT$) 12.09 15.67 15.64 17.15 20.38 Market Cap ($ mn) 1,137
DPS (NT$) 2.42 4.99 6.59 6.60 7.20 Price (NT$) 408.00
Revenue growth (%) 22.2% 28.2% 18.5% 5.9% 12.8% Date Of Price 07 Jan 16
EPS growth (%) 24.4% 29.6% (0.2%) 9.7% 18.8% Free Float(%) -
ROCE 19.1% 15.7% 12.9% 13.3% 14.2% 3M - Avg daily vol (mn) 0.36
ROE 23.0% 20.3% 16.7% 16.2% 17.1% 3M - Avg daily val (NT$ mn) 144.05
P/E (x) 33.7 26.0 26.1 23.8 20.0 3M - Avg daily val ($ mn) 4.3
P/BV (x) 6.0 4.6 4.1 3.6 3.3 TSE 7852.06
EV/EBITDA (x) 26.8 22.6 18.5 16.1 13.7 Exchange Rate 33.22
Dividend Yield 0.6% 1.2% 1.6% 1.6% 1.8% Price Target End Date 31-Dec-16
Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, users should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report.

This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Key catalyst for the stock price: Upside risks to our view: Downside risks to our view:
• Sales growth to re-accelerate • Stronger China demand leads to capacity additions • Slower CL penetration or transition in China
• Successful export from Taiwan plants • Improving cash conversion cycle • Write-off of A/R and inventory
•
Key financial metrics FY13A FY14A FY15E FY16E Valuation and price target basis
Revenues (NT$ mn) 4,879 5,783 6,126 6,911 Our Dec-16 PT of NT$480 is based on 23.5x 2016E P/E,0.5 STD below the
Revenue growth (%) 28.2% 18.5% 5.9% 12.8% average since its listing in April 2012, and at the high-end of the valuation
EBITDA (NT$ mn) 1,758 2,163 2,491 2,903 range for Taiwan non-tech high growth/ROE small/mid-caps. We believe
EBITDA margin (%) 30.8% 30.9% 33.0% 34.3% this is justified by sustainable 10-15% sales growth in the coming years.
Tax rate (%) 11.0% 16.4% 14.6% 16.0% 2016E EPS growth of 19% is inline with the average of 21% in 2012-
Net profit (NT$ mn) 1,420 1,447 1,586 1,884 2015E.
EPS (NT$) 15.67 15.64 17.15 20.38
EPS growth (%) 29.6% -0.2% 9.7% 18.8% Ginko’s forward P/E
DPS (NT$) 4.99 6.59 6.60 7.20
45 35%
BVPS (NT$) 89.12 99.81 112.35 125.53 40 30%
Operating cash flow (NT$ mn) -85 -105 1551 2192 35 25%
Free cash flow (NT$ mn) -1506 -1388 639 1663 30 20%
Interest cover (X) 34.0 21.1 23.5 37.5 25
15%
20
Net margin (%) 29.1% 25.0% 25.9% 27.3% 10%
15
Sales/assets (X) 0.5 0.4 0.4 0.4 10 5%
Debt/equity (%) 30.9% 47.5% 39.1% 30.7% 5 0%
Net debt/equity (%) 8.5% 22.1% 20.4% 9.4% 0 -5%

Jul-12

Jul-13

Jul-14

Jul-15
Apr-12

Oct-12
Jan-13
Apr-13

Oct-13
Jan-14
Apr-14

Oct-14
Jan-15
Apr-15

Oct-15
ROE (%) 20.3% 16.7% 16.2% 17.1%
Key model assumptions FY13A FY14A FY15E FY16E
Sales growth 28.2% 18.5% 5.9% 12.8% Forward PE EPS growth
Gross margin 61.3% 60.1% 60.2% 60.5%
Cash conversion cycle (days) 367 441 509 476
Source: Bloomberg, Company and J.P. Morgan estimates. Source: Bloomberg, Company and J.P. Morgan estimates.

Sensitivity analysis Sales EPS JPMe vs. consensus, change in estimates

Sensitivity to FY15E FY16E FY15E FY16E EPS FY15E FY16E
1% chg in ASP in RMB 0.8% 0.8% 0.8% 0.8% JPMe old 17.43 20.72
1% chg in gross margin 0.0% 0.0% 2.7% 3.0% JPMe new 17.15 20.38
% chg -1.6% -1.6%
Source: Bloomberg, Company, CMAI and J.P. Morgan estimates. Consensus 17.49 20.76
Source: Bloomberg, Company and J.P. Morgan estimates.
Comparative metrics
Name Ticker Rec. CMP Mkt cap P/E EPS Growth P/BV ROE 2015
LC US$m FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E Stk perf.
Ginko International Co Ltd 8406 TT OW 426 1,187 24.8 20.9 10% 19% 3.8 3.4 16% 17% 29%
St Shine Optical Co Ltd 1565 TT N 660 1,000 23.0 20.7 -8% 11% 7.2 6.6 32% 33% 27%
Global contact lens makers
Seed Co Ltd/Tokyo 7743 JP NC 1390 107 27.2 16.8 102% 62% 1.4 1.3 6% 10% -2%
Menicon 7780 JP NC 3680 567 30.3 24.8 39% 22% 1.7 1.7 6% 7% 118%
Interojo Co Ltd 119610 KS NC 37850 340 33.4 26.0 64% 29% 5.6 4.7 18% 20% 101%
Cooper Cos Inc/The COO US OW 132 6,309 17.7 16.8 2% 5% 98.4 13.0 14% 13% -17%
Taiwan non-tech small/mid-cap champions
Giant Manufacturing 9921 TT N 212 2,390 20.9 18.4 -8% 14% 3.8 3.5 19% 20% -22%
Merida Industry Co Ltd 9914 TT OW 170 1,523 16.4 14.9 -8% 10% 3.9 3.6 25% 25% -17%
Eclat Textile Company Ltd 1476 TT N 424 3,428 28.7 23.1 25% 24% 9.9 8.3 37% 39% 41%
Makalot Industrial 1477 TT N 222.0 1,324 20.1 17.3 26% 16% 4.8 4.4 25% 27% 43%
Gourmet Master 2723 TT OW 240.5 1,021 30.5 22.8 111% 34% 4.6 4.0 16% 19% 46%

Wowprime 2727 UW 151.5 351 34.9 19.8 -52% 76% 3.2 3.0 9% 16% -46%
Poya 5904 NC 312.0 895 30.6 24.6 25% 24% 11.5 10.1 38% 43% 28%
Source: Bloomberg, Company and J.P. Morgan estimates. Note: Bloomberg consensus estimates for Non Covered (NC) stocks. Prices are as of 1/6/2016

2
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Figure 1: China contact lens import YoY in value and volume Figure 2: Contact lens market size and growth comparison
60% 3,500 30%
50% 3,000 25%
40% 2,500 20%
30% 2,000 15%
20% 1,500 10%
10% 1,000 5%
0% 500 0%
-10% 0 -5%
2012 2013 2014 11M15 China Taiwan Japan
Volume YoY Value YoY 2014 contact lens market size (m pcs) 11M15 import growth

Source: China Customs Source: J.P. Morgan estimates, China/Taiwan/Japan Customs

Table 1: Earnings revisions

(NT$M) Revised Prior Change
2015E 2016E 2015E 2016E 2015E 2016E
Sales 6,126 6,911 6,127 7,138 0.0% -3.2%
Gross profit 3,688 4,184 3,607 4,187 2.2% -0.1%
Gross margin 60.2% 60.5% 58.9% 58.7% 133 bps 187 bps
Operating profit 2,023 2,370 1,963 2,339 3.1% 1.3%
Operating margin 33.0% 34.3% 32.0% 32.8% 99 bps 152 bps
Net Income 1,586 1,884 1,611 1,915 -1.6% -1.6%
EPS (NT$) 17.2 20.4 17.4 20.7 -1.6% -1.6%
Source: J.P. Morgan estimates.

We have tweaked 2015/16E EPS down by 1.6%, to reflect the FX loss in 3Q15, and
our more cautious view on China overall consumption. Again, while we don't expect
it to repeat the ultra-high growth in the past, we believe 10-15% growth in the
coming years is visible. In addition, we believe the growth this round is probably
better quality from a cash flow angle.

Figure 3: Ginko's monthly sales and YoY growth: Regained Figure 4: Quarterly sales forecasts
momentum 2,000 40%
700 50% 1,800 35%
40% 1,600
600 30%
1,400
500 30% 1,200 25%
20% 1,000 20%
400
10% 800 15%
300 600
0% 10%
200 -10% 400
200 5%
100 -20% 0 0%
0 -30%
4Q15E
1Q16E
2Q16E
3Q16E
4Q16E
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
2013/01
2013/03
2013/05
2013/07
2013/09
2013/11
2014/01
2014/03
2014/05
2014/07
2014/09
2014/11
2015/01
2015/03
2015/05
2015/07
2015/09
2015/11

Quarterly sales (NT$m) YoY

Monthly sales (NT$m) YoY
Source: J.P. Morgan estimates, Company data.
Source: Company data.

3
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Table 2: Ginko's sales breakdown

9M15 1H15 1Q15 2014 9M14 1H14 1Q14 2013
Contact lens: solution 64%/36% 63%/37% 62%/38% 65%/35% 64%/36% 67%:33% 66%:34% 63%/37%
Disposable: long-term 44%/56% 45%/55% 41%/59% 37%/63% 32%/68% 32%:68% 31%:69% 25%:75%
Color: clear 38%/62% 35%/65% 36%/64% 42%/58% 42%:58% 42%:58% 37%:63% 35%:65%
Color outsourced: in-house 12%/88% 15%/85% 40%/60% 38%:62% 50%:50% 70%:30%
Online % 14% 15% 12% 10%
Import 5% 3%
Source: Company data.

Figure 5: Operating & free cash flow analysis (NT$m): Significant Figure 6: Cash conversion cycle analysis/forecasts
improvement 600 497552 534
507 484
2,500 500 428423448 454
343310355366 444
2,000 400 333 494 494
1,500 221226 245
1,000 300 175
200 95 137
500
0 100
(500) 0
(1,000)
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15E
1Q16E
2Q16E
3Q16E
4Q16E
(1,500)
(2,000)
2011 2012 2013 2014 Past 4 2015E 2016E Receivable days Inventory days
quarters
AP/NP days Cash Conv. Cycle
Op. cashflow Free cashflow
Source: J.P. Morgan estimates, Company data.
Source: J.P. Morgan estimates, Company data.

We have rolled forward our PT date to Dec-16 from Jun-16, and hence adjust our
target multiple from 21x 2016E PE (one standard deviation below the average since
its listing) to 23.5x 2016E PE (0.5 STD below the average since listing), to reflect
the confirmation of a growth recovery and improvement in cash flow.

We note that 23.5x is also at the high-end of the valuation for Taiwan non-tech
small/mid champions (high growth/ROE), if excluding a few outliers, and regional
contact lens peers. We believe it is justified by its solid structural growth outlook in
the next few years.

Ginko’s current P/E is line with St. Shine’s, but, in our view, its EPS growth will be
stronger not only in 2016E but also the coming years given better structural growth.
We believe Ginko can enjoy a valuation premium to St. Shine again.

4
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Figure 7: Forward PE Figure 8: Forward PE vs. EPS growth

45 45 35%
40 40 30%
35 35 25%
30 30 20%
25 25
15%
20
20 10%
15
15 5%
10
10 5 0%
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
0 -5%

Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
P/E mean -1std
+1std -2std +2std Forward PE EPS growth

Source: J.P. Morgan estimates, Bloomberg. Source: J.P. Morgan estimates, Bloomberg.

Figure 9: Forward PE and EPS growth comparison: Ginko vs. St. Shine
45 35%
40 30%
35 25%
30 20%
25 15%
20 10%
15 5%
10 0%
5 -5%
0 -10%
4/28/2012
6/28/2012
8/28/2012
10/28/2012
12/28/2012
2/28/2013
4/30/2013
6/30/2013
8/31/2013
10/31/2013
12/31/2013
2/28/2014
4/30/2014
6/30/2014
8/31/2014
10/31/2014
12/31/2014
2/28/2015
4/30/2015
6/30/2015
8/31/2015
10/31/2015
12/31/2015
Ginko's PE St. Shine's PE Ginko's EPS growth St. Shine's EPS growth

Source: J.P. Morgan estimates, Bloomberg.

Table 3: Taiwan high growth/ROE non-tech universe (priced as of January 6 2016) (ranked by market cap)
Name Ticker Rec. CMP Mkt Cap P/E EPS grth. P/BV ROE 2015 Stk.
(TT) (NT$) US$Mn FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E Perf.

PCSC 2912 N 203.5 6,367 25.4 23.1 -8% 10% 7.7 7.1 31% 32% -16%
Eclat 1476 N 424.0 3,432 28.7 23.1 25% 24% 9.9 8.3 37% 39% 41%
Feng Tay 9910 OW 163.0 2,926 23.2 18.8 39% 23% 6.9 5.9 32% 34% 80%
Giant 9921 N 212.0 2,393 21.1 18.6 -8% 14% 3.8 3.6 19% 20% -22%
Merida 9914 OW 169.5 1,525 16.4 14.9 -8% 10% 3.9 3.6 25% 25% -17%
Makalot 1477 N 222.0 1,326 20.2 17.4 26% 16% 4.8 4.4 25% 27% 43%
TW Family Mart 5903 NR 197.0 1,323 31.4 27.5 8% 14% 9.3 8.8 26% 31% 0%

Ginko 8406 OW 426.0 1,188 24.8 20.9 10% 19% 3.8 3.4 16% 17% 29%

Gourmet Master 2723 OW 240.5 1,021 30.5 22.8 111% 34% 4.6 4.0 16% 19% 46%

St. Shine 1565 N 660.0 1,001 23.0 20.7 -8% 11% 7.2 6.6 32% 33% 27%

PC Home 8044 NR 323.0 971 40.7 32.9 8% 24% 8.3 7.5 26% 25% 3%
MoMo 8454 NR 212.0 906 27.7 24.5 -16% 13% 4.9 4.5 19% 19% -36%
Poya 5904 NR 312.0 895 30.6 24.6 25% 24% 11.5 10.1 38% 43% 28%
Paiho 9938 N 70.2 630 18.4 15.5 16% 19% 2.4 2.3 17% 19% 70%
Wowprime 2727 UW 151.5 351 34.9 19.8 -52% 76% 3.2 3.0 9% 16% -46%
Average 26.6 21.7 11% 22% 6.3 5.7 25% 27% 15%
Source: J.P. Morgan estimates, Bloomberg.

5
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Investment Thesis, Valuation and Risks

Ginko International (Overweight; Price Target: NT$480.00)
Investment Thesis
As the number one contact lens brand in China, Ginko should be able to perform in
line with 10-15% contact lens market growth in China, where contact lens
penetration remains low and upgrades from long-term wear to disposable products
should continue.

Valuation
Our Dec-16 PT of NT$480 is based on 23.5x 2016E P/E, 0.5 standard deviation
below the average since its listing in April 2012. We believe this is justified by
10-15% sales growth in the coming years. 19% EPS growth in 2016 is in line with
the average of 21% in 2012-2015E. 23.5x is also at the high-end of the range for the
Taiwan non-tech small/mid-cap champions, and we believe it is supported by its
structural growth.

Risks to Rating and Price Target

Key risks to our rating and price target include slower contact lens penetration or
transition in China and write-off of A/R and inventory.

6
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Ginko International: Summary of Financials

Income Statement Cash flow statement
NT$ in millions, year end Dec FY13 FY14 FY15E FY16E FY17E NT$ in millions, year end Dec FY13 FY14 FY15E FY16E FY17E
Group Turnover 4,879 5,783 6,126 6,911 - Bf. Taxes Income 1,596 1,731 1,858 2,243 -
Cost of goods sold (1,890) (2,309) (2,438) (2,727) - Depr. & amort 274 399 489 558 -
Gross Profit 2,989 3,474 3,688 4,184 - Change in working capital (1,173) (1,905) (542) (170) -
Operating Profit 1,501 1,784 2,023 2,370 - Others (606) (47) 18 (80) -
Total Non-Op.Income/Exp. 95 (54) (166) (126) - Cash Flow-Operating (85) (105) 1,551 2,192 -
Pre-tax Income 1,596 1,731 1,858 2,243 - Sales (purchase) FA (1,422) (1,248) (865) (500) -
Net Profit 1,420 1,447 1,586 1,884 - Others (737) 669 (78) 0 -
EPS 15.67 15.64 17.15 20.38 - Cash Flow-Inv (2,142) (579) (943) (500) -
EPS- adj. NT$/share 15.67 15.64 17.15 20.38 - Debt raised/(repaid) 2,844 2,009 (345) (500) -
Weighted avg. shares 91 93 92 92 - Equity raised/(repaid) 0 0 0 0 -
a a
Margin (%) Dividend paid (452) (610) (610) (666) -
Gross margin 61.3% 60.1% 60.2% 60.5% - Others (43) (199) (106) 0 -
Operating margin 30.8% 30.9% 33.0% 34.3% - Cash Flow-Financing 2,349 1,200 (1,062) (1,166) -
Net margin 29.1% 25.0% 25.9% 27.3% - Change in Cash Flow 180 539 (407) 526 -
Beginning cash 1,626 1,806 2,346 1,939 -
Growth (%) Ending cash 1,806 2,346 1,939 2,465 -
Sales growth 28.2% 18.5% 5.9% 12.8% - Free cash flow (1,475) (1,320) 732 1,722 -
Net profit growth 35.0% 1.9% 9.6% 18.8% - a
EPS growth 29.6% (0.2%) 9.7% 18.8% - a
a
Balance sheet Ratio Analysis
NT$ in millions, year end Dec FY13 FY14 FY15E FY16E FY17E NT$ in millions, year end Dec FY13 FY14 FY15E FY16E FY17E
Cash 1,806 2,346 1,939 2,465 - Total debt/ total capital 23.6% 26.8% 22.3% 20.5% -
Marketable securities 0 0 0 0 - Total debt/equity 30.9% 36.7% 28.8% 25.8% -
Accounts receivable 3,632 5,214 5,652 5,796 - Net debt/equity 8.5% 11.3% 10.1% 4.5% -
Inventories 1,189 1,395 1,650 1,730 - a
Other current assets 923 397 528 584 - Liquidity
Current assets 7,550 9,352 9,769 10,575 - Current ratio 3.1 1.8 2.0 2.4 -
LT investments 0 0 0 0 - Quick ratio 2.6 1.6 1.6 2.0 -
Total gross fixed assets 4,122 5,685 6,607 7,107 - Interest coverage (x) 100.5 53.8 46.2 84.0 -
Accum. Depreciation (852) (994) (1,122) (1,656) - a
Total fixed assets 3,271 4,691 5,485 5,451 - Margin (%)
Total Other assets 799 430 95 95 - Gross margin 61.3% 60.1% 60.2% 60.5% -
Total Assets 11,620 14,474 15,349 16,121 - Operating margin 30.8% 30.9% 33.0% 34.3% -
Short-term loans 1,380 3,239 2,989 2,989 - Net margin 29.1% 25.0% 25.9% 27.3% -
Payables 328 211 361 416 - a
Other current liabilities 706 1,616 1,576 1,076 - Asset Management
Total current liabilities 2,414 5,066 4,926 4,481 - A/R turnover 1.5 1.3 1.1 1.2 -
Long-term debt 1,117 150 0 0 - Inventory turnover 2.1 1.8 1.6 1.6 -
Other liabilities 0 0 0 0 - a
Total Liabilities 3,542 5,238 4,962 4,516 - Profitability
Minority Interest - - - - - ROE 20.3% 16.7% 16.2% 17.1% -
Shareholder's equity 8,077 9,235 10,387 11,605 - ROA 15.1% 11.1% 10.6% 12.0% -
Total Liab. & equity 11,620 14,474 15,349 16,121 - ROCE 15.7% 12.9% 13.3% 14.2% -
a
Other
BV per share (fully diluted) 89.12 99.81 112.35 125.53 -
Cash Dividend 4.99 6.59 6.60 7.20 -
Dividend Yield 1.2% 1.6% 1.6% 1.8% -
Source: Company reports and J.P. Morgan estimates.

7
This material was originally prepared by a J.P. Morgan entity (as identified in the material) in connection with its business and is being
provided to you as a courtesy in a modified format only for informational and educational purposes (not investment purposes), and on
a delayed basis.
Andre Chang, CFA Asia Pacific Equity Research
W W W 07 January 2016
W

Other Companies Discussed in This Report (all prices in this report as of market close on 07 January 2016)
St. Shine (1565.TWO/NT$635.00/Neutral)
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.

Important Disclosures

 Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in
Ginko International, St. Shine.
 Other Significant Financial Interests: J.P. Morgan owns a position of 1 million USD or more in the debt securities of Ginko
International, St. Shine.
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–
covered companies by calling 1-800-477-0406. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen
companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406.
n

Ginko International (8406.TWO, 8406 TT) Price Chart

1,057
OW NT$500

906
OW NT$600 OW NT$435

755
Date Rating Share Price Price Target
OW NT$680 OW NT$450
OW NT$500
(NT$) (NT$)
604
Price(NT$)
05-Jun-14 OW 570.00 680.00
02-Aug-14 OW 418.50 600.00
453
06-Nov-14 OW 419.50 500.00
23-Jan-15 OW 313.00 450.00
302
05-May-15 OW 450.00 500.00
151 06-Aug-15 OW 277.00 435.00

0
Apr Jan Oct Jul Apr Jan
12 13 13 14 15 16

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Jun 05, 2014.

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Andre Chang, CFA Asia Pacific Equity Research
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St. Shine (1565.TWO, 1565 TT) Price Chart

1,533
N NT$510 OW NT$400 Date Rating Share Price Price Target
1,314 (NT$) (NT$)

UW NT$575N NT$485 N NT$390

21-Jul-11 OW 433.00 520.00
1,095 01-Mar-12 OW 371.00 440.00
OW NT$520 OW NT$440
OW NT$430
N NT$450 UW NT$680
N NT$500N NT$530
OW NT$540 09-Aug-12 OW 360.00 430.00
876 09-Jan-13 N 445.00 450.00
Price(NT$) 05-Jun-14 UW 740.00 680.00
657 02-Aug-14 UW 641.00 575.00
15-Oct-14 N 525.00 510.00
438
05-Nov-14 N 521.00 500.00
22-Jan-15 N 526.00 485.00
219
06-May-15 N 585.00 530.00
06-Aug-15 N 395.00 390.00
0
31-Aug-15 OW 323.00 400.00
May Feb Nov Aug May Feb Nov
11 12 12 13 14 15 15 09-Oct-15 OW 491.00 540.00

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Jul 21, 2011.

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research
website.
Coverage Universe: Chang, Andre: AirTAC (1590.TW), Asia Cement (1102.TW), Cheng Shin Rubber (2105.TW), Eclat Textile
(1476.TW), Feng Tay Enterprise (9910.TW), Formosa Optical (5312.TWO), Ginko International (8406.TWO), Gourmet Master
(2723.TW), Green Seal Holding Limited (1262.TW), Hiwin (2049.TW), Makalot Industrial Co., Ltd. (1477.TW), Pou Chen Corporation
(9904.TW), President Chain Store (2912.TW), St. Shine (1565.TWO), Taiwan Cement (1101.TW), Taiwan Paiho Limited (9938.TW),
Uni-President (1216.TW), Wowprime (2727.TW)

J.P. Morgan Equity Research Ratings Distribution, as of December 31, 2015

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage 44% 44% 12%
IB clients* 52% 47% 35%
JPMS Equity Research Coverage 45% 47% 8%
IB clients* 70% 63% 50%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please contact the primary analyst or your J.P. Morgan representative.

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Andre Chang, CFA Asia Pacific Equity Research
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