Q-Tech (1478 HK) Summary
Core Content and Key Highlights
Q-Tech, listed on the Hong Kong Stock Exchange, is a technology company primarily involved in the production of camera components and modules (CCM), as well as other segments such as auto CCM, IoT, and AR/VR. The company has been highlighted for its potential in non-handset business expansion, particularly in the auto and AR/VR markets, despite challenges in the smartphone segment.
Main Points
- 4Q22E Performance: Management expects a quarter-over-quarter (QoQ) improvement in CCM shipment and ASP (Average Selling Price), driven by seasonality. However, the gross profit margin (GPM) is anticipated to remain flat due to increased competition and slower spec upgrades.
- 2023E Outlook: The company is optimistic about the following growth drivers:
- Camera Spec Upgrades: Continued adoption of features like OIS (Optical Image Stabilization), SMA (Smartphone Main Camera), and periscope lenses.
- AR/VR: Growth from see-through and pancake lenses, along with order wins from HTC and iQIYI.
- Auto CCM: Expected to increase sales mix from 4-5% in FY22E to double-digit in FY23E, with a business inflection point anticipated in FY23-24E as new energy vehicle (NEV) shipments grow.
- Valuation and Investment View: The stock is currently trading at a 12-month forward P/E of 7.4x and P/B of 0.8x, which is considered attractive. The target price (TP) is HK$5.60, implying a 48% upside from the current price of HK$3.78. The analyst reiterates a "BUY" rating, with the main catalysts being 4Q shipment improvement, auto CCM growth, and an A-share spin-off.
- Market Position: The company has won over 20 certified OEM/Tier-1 auto customers, indicating a solid presence in the automotive CCM market. It is also expanding into IoT and AR/VR, which are expected to drive future growth.
Financial Overview
Revenue and Growth
| Year |
Revenue (RMB mn) |
YoY Growth (%) |
| FY20A |
17,400 |
32.1 |
| FY21A |
18,663 |
7.3 |
| FY22E |
15,207 |
-18.5 |
| FY23E |
15,623 |
2.7 |
| FY24E |
17,720 |
13.4 |
Net Profit and Earnings Per Share (EPS)
| Year |
Net Profit (RMB mn) |
EPS (Reported) (RMB) |
YoY Growth (%) |
| FY20A |
840.1 |
0.72 |
54.9 |
| FY21A |
862.8 |
0.73 |
2.7 |
| FY22E |
273.3 |
0.23 |
-68.3 |
| FY23E |
552.7 |
0.47 |
102.2 |
| FY24E |
943.5 |
0.80 |
70.7 |
Gross Profit Margin (GPM)
| Year |
GPM (%) |
| FY20A |
10.2 |
| FY21A |
9.4 |
| FY22E |
5.4 |
| FY23E |
7.9 |
| FY24E |
9.9 |
Operating Profit Margin (OPM)
| Year |
OPM (%) |
| FY20A |
6.0 |
| FY21A |
5.6 |
| FY22E |
2.2 |
| FY23E |
4.2 |
| FY24E |
6.2 |
Return on Equity (ROE)
| Year |
ROE (%) |
| FY20A |
25.3 |
| FY21A |
20.3 |
| FY22E |
5.7 |
| FY23E |
10.7 |
| FY24E |
16.4 |
Valuation Metrics
| Metric |
FY23E |
FY24E |
| P/E (x) |
7.4 |
4.3 |
| P/B (x) |
0.8 |
0.7 |
| Dividend Yield (%) |
2.7 |
4.6 |
Shareholding and Stock Data
| Metric |
Value (HK$) |
| Market Cap (mn) |
4,479.3 |
| Avg 3 mths t/o (mn) |
3.7 |
| 52w High/Low |
11.96/2.90 |
| Total Issued Shares (mn) |
1185.0 |
Analyst Ratings
- Q-Tech (1478 HK): BUY
- FOT Hon Teng (6088 HK): BUY
- AAC Tech (2018 HK): HOLD
- Sunny Optical (2382 HK): HOLD
- Tongda (698 HK): BUY
- BYDE (285 HK): HOLD
- TK Group (2283 HK): BUY
- FIH (2038 HK): NR
- Truly (732 HK): NR
- SMIC (981 HK): NR
- YOFC (6869 HK): NR
- Ju Teng (3336 HK): NR
- Cowell (1415 HK): NR
Key Drivers for Growth
- Smartphone CCM: Stabilized shipment and GPM in 4Q, with ASP expected to rise due to spec upgrades in FY23E.
- Auto CCM: Expected to have a double-digit sales mix in FY23E, with significant growth anticipated in FY23-24E.
- IoT and AR/VR: Management is optimistic about growth from these segments, especially with the ramp-up of see-through and pancake lenses and new product developments.
- Catalysts: 4Q shipment improvement, auto CCM expansion, and A-share spin-off are seen as key drivers for future performance.
Conclusion
Q-Tech is expected to see a recovery in the fourth quarter of 2022, with a focus on non-handset business expansion in 2023. Despite the challenges in the smartphone segment, the company's diversification into auto, IoT, and AR/VR markets is seen as a positive trend. The stock is currently undervalued, with a strong upside potential to the target price of HK$5.60, supporting the "BUY" recommendation.
