20230203-招银国际-Apple_FY1Q23_miss_on_macro_and_supply_chain_issues__Expect_weakness_to_persist_in_near_term_4页_1019kb

China Technology Sector Summary

Core Content Overview

This document provides an analysis of the China technology sector, with a focus on Apple's financial performance and the broader implications for the industry. It outlines key financial results, market challenges, and investment recommendations for various technology-related companies.

Apple's FY1Q23 Performance

Apple reported a FY1Q23 (CY4Q22) with:

• EPS: US$1.88, down 10% YoY
• Revenue: US$117.2bn, down 5% YoY
• Performance against consensus: 3.1% and 3.3% below, respectively

The underperformance was primarily attributed to weak macroeconomic conditions and supply chain constraints related to the iPhone 14 Pro and Pro Max models, especially in China due to the ongoing impact of the pandemic.

Segment Revenue Analysis (FY1Q23)

The iPad segment significantly outperformed market estimates, beating by 21%, while Mac and iPhone saw substantial declines. The Services segment remained in-line with expectations, driven by an expanding user base.

Near-Term Outlook

• Revenue for FY2Q23 is expected to remain weak, with a -5% YoY growth, similar to FY1Q23.
• iPhone is expected to accelerate, while Mac and iPad revenue is projected to decline by double digits YoY.
• Gross margin is guided to be between 43.5-44.5%, largely in-line with previous periods.
• Macroeconomic uncertainties and prolonged replacement cycles for high-end Apple products are expected to continue affecting performance in the short term.

Investment Recommendations

• Hold: BYDE, Sunny Optical (high smartphone exposure and fair valuation)
• Buy: FIT Hon Teng, BOEVx, Q-Tech (expanding exposure to non-smartphone components)

Sector Outlook

• The tech sector rally since November has already priced in demand recovery following China's reopening.
• Downside risks from macro slowdown in the US and EU could negatively impact most smartphone supply chains.
• The report recommends staying selective and focusing on companies with non-smartphone exposure, such as those in the automotive sector.

Valuation Table Summary

Key Investment Themes

• Avoid high smartphone exposure stocks due to macroeconomic risks and fair valuation.
• Prioritize non-smartphone components such as automotive, acoustics, and connectors.
• Supply chain dynamics are critical, with Apple's performance heavily influenced by its reliance on Chinese manufacturing and the global demand for its products.

Analyst Contact

• Alex NG – (852) 3900 0881 – alexng@cmbi.com.hk
• Lily YANG, Ph.D – (852) 3916 3716 – lilyyang@cmbi.com.hk
• Claudia LIU – claudialiu@cmbi.com.hk

Related Reports

1. 4Q22 global smartphone shipment down 18% YoY; Continue to prefer non-smartphone plays - 27 Jan 2023
2. Limited surprise on Apple order cut; Suggest to focus on non-smartphone names - 5 Jan 2023
3. Implications of global SPE leaders 3Q22 results on semi industry outlook - 26 Oct 2022

Disclosures

• CMBIGM Ratings:

  • BUY: Potential return of over 15% over next 12 months
  • HOLD: Potential return of +15% to -10% over next 12 months
  • SELL: Potential loss of over 10% over next 12 months
  • NOT RATED: Not rated by CMBIGM

• Analyst Certification:

  • The views expressed reflect personal opinions.
  • No part of the analyst’s compensation is related to the report's content.

• Legal Disclaimer:

  • This report is not investment advice and is for informational purposes only.
  • CMBIGM is not liable for any losses incurred from reliance on the report.
  • The information is based on public data and may change without notice.
  • The report is intended for specific investors and may not be distributed to others without consent.

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