20221103-招银国际-卓胜微-300782.SZ-3Q_performance_dragged_by_weak_mobile__It_is_always_darkest_before_dawn_6页_1mb

Maxscend (300782 CH) Company Update Summary

Core Content

Maxscend, a key player in the domestic RFFE (Radio Frequency Front-End) market, reported its 3Q22 financial results, which showed a decline in revenue and net profit compared to the previous year and quarter. The company's 3Q22 revenue dropped by 30.5% YoY and 13.6% QoQ to RMB782mn, while net profit to shareholders fell by 54.6% YoY and 20.5% QoQ to RMB233mn. This decline was primarily due to the weak mobile market, especially in Android segments.

Despite the challenges, Maxscend's gross margin (GPM) improved slightly to 54.1%, outperforming its peers. The company is expected to maintain a GPM of ~50% in 2023, which is significantly higher than the industry average. This strong margin is attributed to continuous R&D investment, with R&D expenses increasing by 55.1% YoY in 3Q22.

Main Points

1. Financial Performance

• Revenue: 3Q22 declined to RMB782mn (down 30.5% YoY and 13.6% QoQ).
• Net Profit: 3Q22 dropped to RMB233mn (down 54.6% YoY and 20.5% QoQ).
• GPM: Improved to 54.1% in 3Q22 (up 1.3% from 2Q22).
• EPS: 3Q22 was RMB0.44, down 20.7% QoQ and 71.7% YoY.

2. Market Outlook

• The mobile market weakness is a major drag, especially in Android segments.
• The semi-localization trend in China is expected to create opportunities for domestic RFFE suppliers, including Maxscend.
• Sector consolidation is anticipated, and Maxscend is positioned to benefit from this trend, similar to global peers like Skyworks and Qorvo.

3. R&D Progress

• Maxscend has made solid progress in internal R&D, including the launch of its own filter products and the mass production of a new fab line.
• Diplexer and multiplexers are currently under client testing.
• The company is expected to deliver more progress in high-end filter and integrated modules in the coming year.

4. Valuation and Investment Recommendation

• Target Price (TP) is revised to RMB107.8, reflecting revised 2022/23E sales forecasts.
• The new TP is based on a 36x P/E ratio for 2023, which is lower than the 1SD below 2-yr historical average of 43.6x.
• The analyst maintains a BUY recommendation, citing Maxscend's leading position in the domestic RFFE market and its proven management track record.

Key Financial Metrics

Company Positioning

Maxscend has a comprehensive product portfolio covering GaAs PA, SOI Switch, LNA, Filter, Receiver module, Transmitter module, and Wi-Fi module, with a leading position in domestic RFFE market.

Risks and Upsides

Risks:

• Disappointing demand in the mobile segment.
• Intensified competition.
• Slower-than-expected R&D progress.
• Further deterioration in the macroeconomic environment.

Upsides:

• M&A opportunities.
• Sector consolidation.
• Continued R&D investments in key areas.

Market and Share Data

Shareholding Structure

Share Performance

Analysts and Contact Information

• Lily Yang, Ph.D.: (852) 3916 3716 | lilyyang@cmbi.com.hk
• Alex Ng: (852) 3900 0881 | alexng@cmbi.com.hk

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.
• SELL: Potential loss of over 10% over the next 12 months.

Important Disclosures

• The report is not tailored to individual investors and should not be relied upon for investment decisions without professional advice.
• CMBIGM is not a registered broker-dealer in the U.S., and the report is intended solely for major U.S. institutional investors.
• The report is distributed in Singapore by CMBISG, an Exempt Financial Adviser.
• The report contains analyst certifications and disclosure statements to ensure independence and objectivity.

Conclusion

Maxscend faces challenges due to the weak mobile market, but its strong GPM and R&D progress position it well for future growth. The BUY recommendation is maintained, with a revised target price of RMB107.8, reflecting the semi-localization trend in China and the potential for sector consolidation. The company's leading position and proven management team are key factors in this positive outlook.