20220322-招银国际-丘钛科技-01478.HK-1H22_weakness_mostly_priced_in__Maintain_BUY_8页_1mb

Q Technology (1478 HK) Summary

Core Content Overview

Q Technology (1478 HK) is a company primarily engaged in the production of camera modules (CCM) and fingerprint modules (FPM). The company's FY21 results showed a revenue growth of 7.3% YoY and a net profit growth of 2.7% YoY, which were largely in line with preliminary financial disclosures. The firm has maintained a BUY rating, with a revised target price of HK$8.6, indicating a 39% upside from the current price of HK$6.2.

Main Points

• 1H22 Performance: The company experienced a revenue and net profit decline of 7% and 54% YoY, respectively, due to de-stocking effects and margin pressure from new client ramp-up. However, the stock price has already reflected these headwinds.

• 2H22 Outlook: Management expects a rebound with revenue and net profit growth of 13% and 101% YoY, driven by the ramp-up of Samsung orders, auto/loT CCM demand, and channel restocking in 3Q22. The company is also expanding its capacity in India for smartphone CCMs and has ongoing projects in the automotive and IoT sectors.

• Segment Performance:

  • CCM: Shipment increased by 22% YoY, but ASP (average selling price) declined by 9.1%, mainly due to sluggish demand for high-end Android devices. The company is confident that the 32MP+ mix will remain stable at 30% in 2022.
  • FPM: Shipment grew by 24.6% YoY, but ASP dropped by 36%, attributed to lower raw material costs and a mature mobile FPM market.

• Earnings Guidance: Management guided for double-digit growth in mobile CCM shipments and 100%+ YoY growth in IoT/auto CCM shipments for 2022. However, the company lowered its FY22-23E EPS by 34-35% to account for the 1H22 weakness and margin pressure.

• Valuation: The current P/E ratio is 7.2x FY22E, which is 1 standard deviation below the historical average. The target price of HK$8.6 is based on a 10x FY22E P/E, offering a 20% discount to the 5-year average. The stock is considered undervalued with an attractive risk/reward profile.

Key Information

• Target Price: HK$8.6 (39% upside from current price)
• Current Price: HK$6.2
• Market Cap: HK$7,328 million
• Shareholding Structure:
  • He Ningning: 64.28%
  • Vanguard Group: 1.15%
  • Harvest Fund Mgmt.: 1.01%
• Share Performance:
  • 1-month: -24.7%
  • 3-months: -37.0%
  • 6-months: -58.7%

Financial Highlights

Key Catalysts

• 2Q22 shipment recovery
• Samsung order ramp-up
• Auto/loT CCM demand growth
• A-share spin-off
• Newmax integration

Earnings Revision Summary

Valuation Comparison

Financial Summary

Income Statement (YE 31 Dec)

Cash Flow Summary

Balance Sheet (YE 31 Dec)

Key Ratios

Analyst Rating

• Rating: BUY
• Target Price: HK$8.6
• Up/Downside: +39.4%

Analyst Certification

The analyst certifies that the views expressed in the report accurately reflect their personal views and that no part of their compensation is directly or indirectly related to the specific views in the report. The analyst also confirms that they have not traded in the stock covered in the report within 30 days prior to the report's issue and will not trade in it for 3 business days after.

Important Disclosures

• The report is not tailored to individual investors and is for informational purposes only.
• Past performance does not guarantee future results.
• Investors are encouraged to consult a professional financial advisor before making investment decisions.