Willsemi (603501 CH) FY21 Results and Outlook Summary
Core Content
Willsemi released its FY21 results, showing revenue and net profit growth of 21.6% and 65.4% YoY, respectively, reaching RMB24.1bn and RMB4.5bn. The results were in line with preliminary estimates. Despite a weak performance in smartphone CIS, the company's non-mobile CIS segment, particularly in Auto and Security, drove strong growth, with 85% and 70% YoY increases. The TDDI segment also showed significant growth of 163.9% YoY, driven by strong demand and supply constraints.
Key Highlights
- Non-Mobile CIS Growth: Auto CIS revenue reached US$361mn (up 80% YoY), Security CIS reached US$481mn (up 60% YoY), contributing to 41% of total CIS revenue in FY21.
- TDDI Segment: Revenue grew by 160%+ to US$304mn in FY21, with plans for adoption in smartphone solutions in 2022.
- Gross Margin: Increased to 34.5% in FY21, attributed to favorable product mix and margin improvement in mobile CIS.
- Inventory Levels: Rose by 66.5% YoY to RMB8.8bn, which is 4% higher than 2020 as a percentage of total assets, likely due to supply chain issues and logistics disruptions.
Outlook and Ratings
- Maintain BUY Rating: With a new target price of RMB270.0, reflecting a +64% upside from the current price of RMB164.44.
- Target Price Justification: Based on a lower 42x FY22E P/E and the expectation that the weak mobile market has been largely priced in.
- Potential Risks: Include a worse-than-expected global economy and semi shortage affecting demand.
Financial Performance (FY20A to FY24E)
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue (RMB mn) |
19,824 |
24,104 |
30,272 |
36,242 |
41,494 |
| YoY Growth (%) |
45.4% |
21.6% |
25.6% |
19.7% |
14.5% |
| Gross Profit (RMB mn) |
5,930 |
8,314 |
10,513 |
12,657 |
14,545 |
| Gross Margin (%) |
29.9% |
34.5% |
34.7% |
34.9% |
35.1% |
| Net Profit (RMB mn) |
2,706 |
4,476 |
5,697 |
7,011 |
8,204 |
| Net Profit Margin (%) |
13.7% |
18.6% |
18.8% |
19.3% |
19.8% |
| EPS (RMB) |
3.21 |
5.16 |
6.44 |
7.87 |
9.17 |
| P/E (x) |
51.2 |
31.9 |
25.5 |
20.9 |
17.9 |
Growth Drivers
- Non-Mobile CIS: Expected to gradually surpass mobile CIS revenue, with strong demand in Auto and Security segments.
- Mobile CIS: Still has growth potential as Android OEMs upgrade to compete with Apple and capture Huawei's market share.
- TDDI: Seen as a key growth driver due to its import substitute potential and adoption in 2022.
Peer Comparison
| Company |
Market Cap (US$ mn) |
Price (LC) |
FY22E P/E |
FY23E P/E |
FY22E ROE |
FY23E ROE |
| Willsemi |
22,621 |
164.44 |
25.5 |
20.9 |
24.6 |
22.7 |
| GalaxyCore |
8,052 |
20.50 |
28.8 |
23.5 |
21.5 |
20.9 |
| Sony |
111,581 |
88.48 |
16.1 |
15.5 |
14.2 |
16.3 |
| Samsung |
324,453 |
67,300 |
9.5 |
8.4 |
14.8 |
14.9 |
| STMicroelectronics |
33,535 |
34.16 |
11.8 |
11.4 |
27.3 |
21.6 |
| ON Semi |
23,703 |
54.57 |
13.0 |
12.2 |
33.5 |
27.6 |
Analyst Information
- Analysts: Lily Yang, Ph.D; Alex Ng; Lana Lin
- Contact:
CMBIGM Ratings
- BUY: Potential return of over 15% over the next 12 months.
- HOLD: Potential return of +15% to -10% over the next 12 months.
- OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
- MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
- UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.
Financial Summary
Income Statement
| Item |
FY20A (RMB mn) |
FY21A (RMB mn) |
FY22E (RMB mn) |
FY23E (RMB mn) |
FY24E (RMB mn) |
| Revenue |
19,824 |
24,104 |
30,272 |
36,242 |
41,494 |
| COGS |
-13,894 |
-15,790 |
-19,759 |
-23,584 |
-26,949 |
| Gross Profit |
5,930 |
8,314 |
10,513 |
12,657 |
14,545 |
| Operating Profit |
2,956 |
5,000 |
6,425 |
7,908 |
9,253 |
| Net Profit |
2,683 |
4,546 |
5,785 |
7,011 |
8,204 |
Balance Sheet
| Item |
FY20A (RMB mn) |
FY21A (RMB mn) |
FY22E (RMB mn) |
FY23E (RMB mn) |
FY24E (RMB mn) |
| Total Assets |
22,648 |
32,080 |
40,572 |
50,348 |
59,918 |
| Total Liabilities |
11,123 |
15,776 |
17,429 |
19,424 |
20,675 |
| Total Equity |
11,525 |
16,304 |
23,143 |
30,924 |
39,243 |
| Share Capital |
868 |
876 |
885 |
890 |
894 |
| Retained Earnings |
3,895 |
8,049 |
13,228 |
19,583 |
26,984 |
Key Ratios
| Ratio |
FY20A (%) |
FY21A (%) |
FY22E (%) |
FY23E (%) |
FY24E (%) |
| Gross Margin |
29.9 |
34.5 |
34.7 |
34.9 |
35.1 |
| Net Profit Margin |
13.7 |
18.6 |
18.8 |
19.3 |
19.8 |
| ROE |
23.5 |
27.5 |
24.6 |
22.7 |
20.9 |
| Net Debt/Total Equity |
6.7 |
10.9 |
Net |
Net |
Net |
| Debt/EBITDA |
1.7 |
1.6 |
1.3 |
1.1 |
1.0 |
| Interest Coverage |
12.5 |
14.3 |
17.1 |
20.5 |
22.3 |
| Cash Conversion Cycle |
123.1 |
152.5 |
157.5 |
149.5 |
140.5 |
Conclusion
Willsemi's FY21 results reflect a strong performance in non-mobile CIS, particularly in Auto and Security, which offset the weakness in the smartphone segment. The company maintains a BUY rating with a target price of RMB270.0, and is expected to continue its growth trajectory in the coming years. Despite challenges such as inventory levels and potential global economic downturns, the company's strategic focus on non-mobile CIS and TDDI is seen as a solid foundation for future growth.
