20211101-招银国际-韦尔股份-603501.SH-Long-term_positive_view_unchanged_with_non-mobile_CIS_to_power_future_growth_8页_1mb

CMB International Securities | Equity Research | Company Update - Willsemi (603501 CH)

Core Content

Willsemi, a leading player in the China-based CIS (CMOS Image Sensor) market, reported its 3Q21 results, with revenue and net profit at RMB5.9bn and RMB1.3bn, respectively, showing a -1.0% and +73.1% YoY growth. The company's performance was affected by weak smartphone sales and supply chain constraints. Despite these challenges, the firm maintains a BUY rating with a revised target price (TP) of RMB346.6, reflecting a 30% upside from the current price of RMB266.00.

Main Points

• Revenue and Net Profit:

  • 3Q21 revenue: RMB5.9bn (-1.0% YoY)
  • 3Q21 net profit: RMB1.3bn (+73.1% YoY)
  • 3Q21 gross profit margin (GPM): 35.5% (up from 29.9% in 2020 and 33.7% in 2Q21)

• Market Conditions:

  • Global smartphone shipments declined by 6% YoY in 3Q21 due to component shortages and weak consumer demand.
  • The company's mobile CIS business faced challenges, but it is expected to gain market share in FY22E with new 50MP/100MP/200MP products.

• Non-Mobile CIS Growth:

  • Non-mobile CIS business is a key driver of future growth, contributing 50% of CIS sales in 3Q21.
  • The auto and AR/VR segments are expected to experience rapid growth, similar to the smartphone market, with higher ASP and quantity.

• Earnings Forecasts:

  • Revenue forecasts for FY21E-FY23E were revised down by 8%-16% due to weak smartphone sales and prolonged supply chain constraints.
  • Gross profit margin is expected to improve due to better product mix.
  • Net profit is forecasted to grow from RMB4.656bn in FY21E to RMB8.056bn in FY23E.

• Valuation:

  • The company's TP is based on a 50x FY22E P/E ratio.
  • The 12-month forward P/E is 38.4x, with the TP at RMB346.6.

Key Financial Highlights

• Revenue Growth:

  • FY21E: 23.4% YoY
  • FY22E: 34.7% YoY
  • FY23E: 26.3% YoY

• Gross Profit:

  • FY21E: RMB8.261bn
  • FY22E: RMB11.260bn
  • FY23E: RMB14.293bn

• Net Profit:

  • FY21E: RMB4.656bn
  • FY22E: RMB6.180bn
  • FY23E: RMB8.056bn

• EPS:

  • FY21E: RMB5.22
  • FY22E: RMB6.93
  • FY23E: RMB9.04

• P/E Ratio:

  • FY21E: 50.9x
  • FY22E: 38.4x
  • FY23E: 29.4x

• P/B Ratio:

  • FY21E: 15.1x
  • FY22E: 10.2x
  • FY23E: 7.3x

• ROE:

  • FY21E: 29.1%
  • FY22E: 26.0%
  • FY23E: 24.4%

Key Risks and Upsides

Potential Upsides:

1. Faster-than-expected easing of supply chain constraints
2. New devices or killer apps in VR/AR segments

Potential Risks:

1. Worse-than-expected global economic conditions that may curb consumer spending
2. Prolonged chip shortage leading to unfilled demand

Market Position

• Willsemi is a key player in the auto CIS market, currently ranked No.2 among auto CIS suppliers.
• The company is closing the market share gap with ON Semi.
• It has partnerships with ADAS developers like Mobileye and is working on expanding into the U.S. market.

Share Performance

• 1-month return: 9.0% (Absolute) / 8.7% (Relative)
• 3-month return: -15.3% (Absolute) / -18.6% (Relative)
• 6-month return: -12.8% (Absolute) / -14.5% (Relative)

Shareholding Structure

• Yu Renrong: 30.85%
• SX Weihao Equity Invest. FD: 9.30%
• HKSCC: 5.18%

Stock Data

• Market Cap: RMB231,182 million
• Average 3-month Turnover: RMB2,116 million
• 52-week High/Low: RMB345 / RMB184.99
• Total Issued Shares: 869.1 million

Earnings Revisions

• Revenue:

  • FY21E: RMB24,470 million
  • FY22E: RMB32,968 million
  • FY23E: RMB41,635 million

• Gross Profit:

  • FY21E: RMB8,261 million
  • FY22E: RMB11,260 million
  • FY23E: RMB14,293 million

• Net Profit:

  • FY21E: RMB4,656 million
  • FY22E: RMB6,180 million
  • FY23E: RMB8,056 million

Valuation Comparison with Peers

• Willsemi: P/E (FY21E: 50.9x, FY22E: 38.4x), P/B (FY21E: 15.1x, FY22E: 10.2x), ROE (FY21E: 29.1%, FY22E: 26.0%)
• GalaxyCore: P/E (FY21E: 51.3x, FY22E: 31.0x), P/B (FY21E: 12.0x, FY22E: 8.5x), ROE (FY21E: 23.4%, FY22E: 27.6%)
• Sony: P/E (FY21E: 14.3x, FY22E: 20.3x), P/B (FY21E: 3.2x, FY22E: 2.7x), ROE (FY21E: 23.4%, FY22E: 13.2%)
• Samsung: P/E (FY21E: 11.8x, FY22E: 10.7x), P/B (FY21E: 1.6x, FY22E: 1.4x), ROE (FY21E: 14.0%, FY22E: 13.7%)

Conclusion

Despite the challenges in the mobile CIS market due to weak smartphone sales and supply chain constraints, Willsemi's non-mobile CIS business, particularly in the auto and AR/VR segments, is expected to drive future growth. The firm maintains a BUY rating with a target price of RMB346.6, reflecting confidence in its ability to capitalize on these growth opportunities.