20220307-招银国际-格科微-688728.SH-Transiting_into_fab-lite_model_to_secure_capacity_and_support_tech_advancement_4页_975kb

GalaxyCore (688728 CH) Summary

Core Content

GalaxyCore, a leading provider of smartphone CIS (CMOS Image Sensors), is currently the global No.1 in CIS shipments. The company is transitioning from a fabless model to a fab-lite model to secure production capacity and support technological advancement. This strategic shift is expected to enhance its competitiveness in the high-end CIS market.

Key Financial Highlights

• Revenue Growth:

  • FY21E: 8.4% YoY
  • FY22E: 35.9% YoY
  • FY23E: 33.5% YoY

• Net Profit Growth:

  • FY21E: 62.8% YoY
  • FY22E: 44.3% YoY
  • FY23E: 29.0% YoY

• Earnings Per Share (EPS):

  • FY21E: 0.54 RMB
  • FY22E: 0.73 RMB
  • FY23E: 0.94 RMB

• P/E Ratio:

  • FY21E: 45.4x
  • FY22E: 33.8x
  • FY23E: 26.2x

• Net Profit Margin:

  • FY21E: 18.0%
  • FY22E: 19.1%
  • FY23E: 18.5%

• Target Price: RMB34.1 (Previously RMB48.2), representing a potential upside of +39% from the current price of RMB24.51.

Main Points and Outlook

• Fiscal Year 2021 Performance:

  • Revenue and net profit growth were slower than expected due to weak smartphone market growth and unfavorable product mix.
  • Global smartphone shipment growth was 4.5% YoY, the first positive growth since 2017, but still below pre-pandemic levels.
  • Profitability improved significantly, with NPM rising to 18% in FY21 from 12% in FY20.

• Strategic Shift to Fab-lite:

  • GalaxyCore is transitioning to a fab-lite model to secure production capacity and support high-end CIS development.
  • The new CIS production line is expected to begin pilot production in Q2/Q3 of this year, with full mass production by year-end.
  • The company is expected to leverage its experience in fab operations to gain a competitive edge in the high-end CIS market.

• Key Risks:

  • Weaker-than-expected market growth and semiconductor shortages.
  • Intensified competition in the CIS market.
  • Delays in the development of its 12-inch CIS production lines.

Financial Summary

• Revenue:

  • FY19A: 3,690 RMB mn
  • FY20A: 6,456 RMB mn
  • FY21E: 7,001 RMB mn
  • FY22E: 9,512 RMB mn
  • FY23E: 12,699 RMB mn

• Gross Profit:

  • FY19A: 961 RMB mn
  • FY20A: 1,839 RMB mn
  • FY21E: 2,323 RMB mn
  • FY22E: 3,216 RMB mn
  • FY23E: 4,243 RMB mn

• Net Profit:

  • FY19A: 359 RMB mn
  • FY20A: 773 RMB mn
  • FY21E: 1,259 RMB mn
  • FY22E: 1,817 RMB mn
  • FY23E: 2,344 RMB mn

• Net Debt/Total Equity:

  • FY19A: 108.0%
  • FY20A: 11.0%
  • FY21E: Net cash
  • FY22E: Net cash
  • FY23E: Net cash

Shareholding and Stock Performance

• Market Cap: RMB61,248 mn

• Shareholding Structure:

  • Uni Sky: 42.02%
  • COSMOS: 12.43%
  • Hopefield: 7.0%

• Share Performance:

  • 1-mth: -4.4%
  • 3-mth: -28.5%
  • 6-mth: -27.1%

• 12-Month Price Performance:

  • High: RMB41.00
  • Low: RMB23.52

Key Ratios

• CMOS Revenue %:

  • FY19A: 87%
  • FY20A: 91%
  • FY21E: 85%
  • FY22E: 67%
  • FY23E: 57%

• Gross Margin:

  • FY19A: 26.0%
  • FY20A: 28.5%
  • FY21E: 33.2%
  • FY22E: 33.8%
  • FY23E: 33.4%

• Operating Margin:

  • FY19A: 11.0%
  • FY20A: 14.3%
  • FY21E: 21.0%
  • FY22E: 21.8%
  • FY23E: 21.0%

• ROE:

  • FY19A: 135.0%
  • FY20A: 28.4%
  • FY21E: 19.4%
  • FY22E: 21.8%
  • FY23E: 22.0%

Related Reports

• GalaxyCore - Rising star well poised to ride the CIS boom (24 Aug 2021)
• China CIS market - Beginning of multi-year growth cycle; Initiate BUY on Willsemi and GalaxyCore (24 Aug 2021)

Earnings Revision

• Revenue:

  • New: 7,001 / 9,512 / 12,699 RMB mn
  • Old: 8,787 / 14,275 / 19,491 RMB mn
  • Diff: -20% / -33% / -35%

• Gross Profit:

  • New: 2,323 / 3,216 / 4,243 RMB mn
  • Old: 2,792 / 4,579 / 5,865 RMB mn
  • Diff: -17% / -30% / -28%

• Net Profit:

  • New: 1,259 / 1,817 / 2,344 RMB mn
  • Old: 1,454 / 2,408 / 2,930 RMB mn
  • Diff: -13% / -25% / -20%

Analyst Rating and Recommendations

• CMBIGM Rating: BUY
• Potential Return: Over 15% over next 12 months

CMB International Global Markets Limited

• Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong
• Tel: (852) 3900 0888
• Fax: (852) 3900 0800
• Parent Company: CMB International Capital Corporation Limited (a subsidiary of China Merchants Bank)

Important Disclosures

• The information in this report is not suitable for all investors and is not individually tailored.
• CMBIGM does not guarantee the accuracy or completeness of the information provided.
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.

Legal Disclaimers

• The report is not an offer or solicitation to buy or sell any securities.
• CMBIGM is not a registered broker-dealer in the United States, Singapore, or the United Kingdom and may not be suitable for all jurisdictions.