20200910-招银国际-歌尔股份-002241.SZ-Riding_on_TWS_VR_boom__Upgrade_to_BUY_6页_1mb

Goertek (002241 CH) - Company Update Summary

Core Content

CMB International Securities has upgraded Goertek from Hold to BUY, citing strong growth prospects in the TWS (True Wireless Stereo) and VR/AR (Virtual Reality/ Augmented Reality) segments. The upgrade is based on improved product pipelines, including AirPods Pro/Studio, HomePod 2, and Oculus Quest 2, as well as positive changes in yield and margin. The target price has been revised to RMB46, reflecting a 40x P/E multiple on FY21E earnings, which is in-line with the 1-sd above the 5-year average P/E. The company is expected to achieve a 35% CAGR in EPS from FY20 to FY22, with strong earnings visibility and improving ROE.

Main Points

• Upgrade to BUY: Reflecting a more positive outlook on Goertek's growth and performance.
• Target Price: RMB46, based on 40x FY21E P/E, up from the previous target.
• Earnings Growth: Expected net profit growth of 118% in 2H20E and 51% in FY21E YoY.
• EPS Revisions: Revised FY20-22E EPS by 27–51%, with FY21/22E EPS 19% and 13% above consensus, respectively.
• Product Launches: AirPods Studio, HomePod 2, and Oculus Quest 2 are key near-term catalysts.
• Market Position: Goertek holds a leading position in the TWS segment, with expected share gains and margin improvements.
• Financial Highlights: Revenue and net profit are projected to grow significantly, with a CAGR of 36% and 35% respectively from FY20 to FY22E.
• Key Segments: Hearable products are the main growth driver, with expected growth rates of 84% and 22% in FY21E and FY22E, respectively.
• Capacity Expansion: Goertek raised RMB4bn in convertible bonds to expand production capacity for TWS earphones, VR/AR products, and optical modules.
• Valuation: The company's P/E and P/B ratios are in line with industry standards and show improvement over time.

Financial Analysis

• Revenue: Expected to grow at a CAGR of 36% from FY20 to FY22E, reaching RMB93,097 million in FY22E.
• Net Profit: Projected to grow at a CAGR of 35% from FY20 to FY22E, reaching RMB4,466 million in FY22E.
• EPS: Expected to increase from RMB0.76 in FY20E to RMB1.38 in FY22E, with FY21E at RMB1.15.
• Gross Margin: Expected to remain stable around 17% for FY20E to FY22E.
• Operating Margin: Expected to improve from 5.1% in FY19A to 5.7% in FY20E, and then slightly decline to 5.6% in FY22E.
• Net Margin: Expected to increase from 4.3% in FY19A to 4.9% in FY20E, then slightly decrease to 4.8% in FY22E.
• ROE: Projected to increase from 7.9% in FY19A to 18.5% in FY22E, indicating improved profitability.
• P/E Ratio: Expected to decrease from 51.4x in FY20E to 28.3x in FY22E.
• P/B Ratio: Expected to decrease from 7.0x in FY20E to 5.2x in FY22E.
• Yield: Expected to increase from 0.5% in FY20E to 0.9% in FY22E, showing improved returns on equity.

Key Information

• Earnings Summary:

  • FY20E: Revenue RMB50,443 million, Net profit RMB2,454 million.
  • FY21E: Revenue RMB76,661 million, Net profit RMB3,731 million.
  • FY22E: Revenue RMB93,097 million, Net profit RMB4,466 million.

• Earnings Revisions:

  • Revenue: Up 13% in FY20E, 27% in FY21E, and 29% in FY22E.
  • Net profit: Up 26% in FY20E, 46% in FY21E, and 51% in FY22E.
  • EPS: Up 27% in FY20E, 47% in FY21E, and 51% in FY22E.

• Segment Breakdown:

  • Precision Components: Expected to grow at 15% CAGR.
  • Hearable Products: Expected to grow at 84% in FY21E and 22% in FY22E.
  • VR/AR: Expected to grow significantly, with a 82% YoY increase in FY20E and 40% in FY21E.
  • Other Smart Products: Expected to grow at a moderate pace.
  • Non-main Business: Expected to grow at a lower rate.

• Financial Ratios:

  • ROE: Projected to increase from 13.7% in FY20E to 18.5% in FY22E.
  • Current Ratio: Expected to remain stable around 1.0x.
  • Inventory Turnover Days: Expected to remain stable at 54 days.
  • Receivable Turnover Days: Expected to remain stable at 80 days.
  • Payable Turnover Days: Expected to remain stable at 94 days.

• Share Performance:

  • 1-month return: 0.8% absolute, 1.1% relative.
  • 3-month return: 66.6% absolute, 42.7% relative.
  • 6-month return: 75.9% absolute, 55.1% relative.

• Shareholding Structure:

  • Weifang Geer Group: 17.99%
  • Jiang Bin: 11.51%
  • Jiang Long: 6.02%

Valuation Table

Key Ratios

Summary

Goertek is showing strong growth potential, particularly in the TWS and VR/AR segments, driven by product launches and capacity expansion. The upgrade to BUY is supported by improved financial metrics, including rising EPS, growing revenue, and enhanced profitability. The company's target price of RMB46 is based on a 40x P/E multiple on FY21E earnings, reflecting positive expectations and strong earnings visibility. Key financial indicators like ROE, gross margin, and net profit margin are expected to improve significantly, indicating better performance and efficiency. The company's valuation and financial ratios suggest it is well-positioned for growth, with a focus on high-growth areas and a solid financial foundation.