Yesterday, shares of Nam Tai (NTE) went on a joyride, climbing almost 20% in pre-market following outstanding Q4 results, before closing down over 7% due to concerns of gross margin pressure. We believe fears of margin pressure are completely overblown. Management guided to margin pressure throughout 2012, a period in which gross margins improved over 700bps. In fact, management has been warning about, but not demonstrating, margin pressure for the last 10 years. However, even if we use management's absurdly conservative guidance, we still see approximately $2.50 in EPS in 2013 (P/E under 4 ex-cash). Moreover, many things we learned on the call are significant positives beyond our already bullish expectations heading into the call.
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