20230116-招银国际-韦尔股份-603501.SH-Preliminary_2022_results_came_in_below_estimate__Maintain_HOLD_4页_959kb

Willsemi (603501 CH) Company Update Summary

Core Content Overview

Willsemi, a Chinese technology company, reported preliminary 2022 results that fell below expectations, leading to a HOLD recommendation with a revised target price of RMB72. The results indicate significant challenges in the company's performance, primarily driven by weak consumer electronic demand and inventory write-downs. The firm's financials and market position are analyzed to assess its current standing and future prospects.

Main Points

2022 Performance

• Preliminary 2022 Net Income: RMB800mn to RMB1,200mn, representing a 73.2% to 82.1% YoY decline.
• Revenue: RMB19,849mn, showing a -17.7% YoY growth.
• Net Profit Margin: 5.5% in FY22E, down from 18.6% in FY21A.
• EPS: RMB0.91 in FY22E, down from RMB5.16 in FY21A.
• P/E Ratio: 92.7x for FY22E, down to 34.4x for FY23E.

Factors Affecting Performance

• Weak Consumer Electronics Market Demand: Particularly in smartphones and PCs, due to ongoing macroeconomic pressures.
• Inventory Write-Downs: RMB1.3bn to RMB1.5bn, attributed to a high inventory base.
• Market Outlook: Despite China's re-opening, smartphone and PC demand is expected to remain weak in the short-term, with catering and travel likely to be more significant post-reopening.

Financial Outlook

• 2023E Revenue: RMB21,661mn, showing a 9.1% YoY growth.
• EPS Revised Down: By 8% due to continued demand pressure.
• Target Price (TP): RMB72.0, down from RMB78.0, with a -15% downside from current price (RMB84.37).
• Smartphone Market Growth: Projected to grow 2% to 2.6% YoY, with low base in 2022 (11% decline).
• CIS Revenue Contribution: Mobile CIS accounts for 44% of total revenue.

Key Information

Inventory Digestion

• Inventory Reduction: Expected to continue into 1Q23, but not necessarily a sign of market recovery.
• Supply Chain Catalysts: Demand-side confidence is more impactful than inventory reduction for earnings upside and potential revaluation.

Market Position and Sector

• China Technology Sector: Long-term positive outlook is maintained, but near-term challenges persist.
• Stock Data: Market Cap of HK$100,011mn, with 12-month price performance depicted in a chart.

Shareholding and Performance

• Shareholding Structure:
  • Yu Renrong: 30.24%
  • SX Weihao Equity Invest. FD: 9.21%
  • HKSCC: 7.44%
• Share Performance:
  • 1-month: -0.2%
  • 3-months: -5.0%
  • 6-months: -21.7%

Financial Summary

• Cash Flow:
  • Net Cash from Operating: RMB-960mn in FY22E, turning positive in FY23E at RMB6,312mn.
  • Net Cash from Investing: RMB-2,249mn in FY22E, expected to improve in FY23E.
  • Net Cash from Financing: RMB1,360mn in FY22E, with a -1,760mn in FY23E.

Balance Sheet

• Total Assets: RMB33,969mn in FY22E, expected to grow to RMB38,800mn in FY24E.
• Total Liabilities: RMB15,185mn in FY22E, expected to decrease to RMB13,564mn in FY24E.
• Total Equity: RMB18,784mn in FY22E, growing to RMB25,235mn in FY24E.

Key Ratios

• Revenue by Segment:
  • CMOS: 65.3% of FY22E revenue, expected to grow to 68.9% in FY24E.
  • TDDI: 1,707mn in FY22E, expected to remain stable.
  • Others: RMB5,188mn in FY22E, projected to grow to RMB5,639mn in FY24E.
• Profitability:
  • ROE: 5.8% in FY22E, expected to rise to 13.1% in FY24E.
  • ROA: 3.2% in FY22E, projected to increase to 8.5% in FY24E.
• Debt and Leverage:
  • Net Debt/Total Equity: 22.1% in FY22E, expected to drop to net cash in FY23E.
  • Debt/EBITDA: 2.8 in FY22E, expected to decline to 1.5 in FY24E.
  • Interest Coverage: 8.3 in FY22E, projected to increase to 14.6 in FY24E.

CMBIGM Ratings

• BUY: Potential return of over 15% over next 12 months.
• HOLD: Potential return of +15% to -10% over next 12 months.
• SELL: Potential loss of over 10% over next 12 months.
• NOT RATED: Stock is not rated by CMBIGM.

Disclosures

• The report is not individually tailored and not suitable for all investors.
• Past performance does not guarantee future results.
• Investment decisions should be made after independent evaluation and consultation with a financial advisor.
• CMBIGM does not assume liability for any losses incurred from relying on the report.
• The report is intended for specific recipients and not for public distribution.

Legal and Regulatory Information

• The report is subject to various jurisdictions and regulatory restrictions.
• UK Recipients: Only for those falling under Article 19(5) or Article 49(2) of the Financial Promotion Order.
• US Recipients: Only for major US institutional investors.
• Singapore Recipients: Distributed by CMBISG, an Exempt Financial Adviser, and regulated by MAS.

Analyst Certification

• The analyst certifies that the views expressed accurately reflect personal opinions.
• No compensation is directly or indirectly related to the report's content.
• The analyst confirms no trading or conflicts of interest within 30 days prior to the report's issue.

Conclusion

Willsemi faces continued demand pressure in the consumer electronics sector, particularly in smartphones and PCs. While inventory levels are expected to decline, this does not necessarily signal a market turnaround. The HOLD recommendation is maintained, with a revised target price of RMB72. The company's financial performance and market outlook suggest moderate growth in the short-term, with limited upside unless there is an earlier-than-expected recovery in consumer demand.