20180822-招商证券_香港_-瑞声科技-02018.HK-Expect_a_2H18_recovery__maintain_BUY_6页_900kb

AAC Technologies (2018 HK) Summary

Core Content

AAC Technologies is a leading player in the hardware technology sector, primarily involved in the production of acoustic, haptics, and optics components. The report highlights the company's performance in the second quarter of 2018 and provides insights into its future outlook, financial projections, and investment ratings.

Main Points

• 2Q18 Performance:
  AAC Technologies missed expectations in Q2 2018, with revenue falling 15% YoY to RMB3.8bn (20% below the Street's estimate of RMB4.7bn). Gross margin contracted to 35.2% from 38.0% in Q1 2018 and 40.0% in Q2 2017. The underperformance was attributed to shipment weakness in Haptics & Mechanical (H&M) products and FX headwinds from the appreciation of the RMB.

• Recovery Outlook for 2H18:
  The company is expected to recover in the second half of 2018, driven by the new product cycle at its key customer, growing adoption of SLS acoustic products in Android phones, and favorable FX trends. Management remains optimistic about the Optics business, which is projected to benefit from both shipment growth and higher ASP (Average Selling Price) in 2019.

• Estimates and Target Price:
  The report lowers its 2018E and 2019E EPS estimates by 10% and 8%, respectively, due to weaker revenue and margin outlook. The new target price is set at HK$110, down from HK$120, based on a 16x 2019E P/E ratio. Despite the downward revision, the rating is maintained at BUY, reflecting the company's long-term potential.

• Product Roadmap:

  • Acoustic: SLS (Sonic Layered Structure) is the current product, with plans to introduce a new generation in 2H18. Management expects increased adoption in Android flagship and mid-range models, which could boost sales and GM.
  • Haptics & Mechanical: Revenue declined by more than 20% YoY due to weak customer demand, but management anticipates a rebound from the adoption of virtual key Android technology and improved user experience in applications like gaming.
  • Optics: The company aims to improve its product mix, reducing the proportion of 4P lenses to 10–15% by 2019. Plastic lens shipments are projected to reach 25–30mn units per month in 3Q18, and WLG (Wireless Lens Glass) capacity is expected to reach 5–10mn units per month by year-end 2018.

• Financial Overview:

  • Revenue: Projected to grow at a CAGR of 18% from 2017 to 2019, with a 5.4% growth in 2018E.
  • Net Profit: Expected to grow at a CAGR of 19% from 2017 to 2019, with a slight decline in 2018E.
  • EPS: Estimated to be RMB4.33 for 2018E and RMB5.83 for 2019E.
  • Valuation Ratios: The forward P/E ratio is projected to decrease from 17.0 in 2018E to 13.0 in 2019E, while the P/B ratio is expected to drop from 4.4 to 3.7 over the same period.

• Shareholding and Market Data:

  • Market Cap: HK$106,558 million.
  • 52-week range: HK$78.15 to HK$185.0.
  • Free float: 59.39%.
  • Key shareholders include Wu Chunyuan (21.51%), Pan Zhengmin (19.03%), Capital Group Cos Inc (14.18%), and JP Morgan Chase & Co (12.47%).

• Investment Rating:

  • Company Rating: BUY.
  • Industry Rating: OVERWEIGHT, indicating the sector is expected to outperform the market over the next 12 months.

Key Financial Highlights

Analyst Contact

• Kevin CHEN: +852 3189 6125, kevinchen@cmschina.com.hk
• Angela LIN: +852 3189 6635, angelalin@cmschina.com.hk

Disclaimer

This document is for informational purposes only and is not intended as investment advice. The information and opinions are based on sources believed to be reliable but are not guaranteed to be accurate or complete. The analysis is subject to change without notice, and past performance is not indicative of future results. Investors are advised to consult independent financial and tax advisors before making investment decisions.