Q Technology (1478 HK) Company Update Summary
Core Content and Main Points
Q Technology (1478 HK) is a company operating in the technology sector, with a focus on camera modules (CCM) and fingerprint modules (FPM). The report outlines the company's performance, outlook, and valuation, highlighting both challenges and opportunities.
Key Highlights
- Investor Call Insights: Management remains confident in achieving 100% YoY growth in IoT/Auto CCM. However, they expect the previous guidance of 10% YoY growth in CCM and 20%+ YoY growth in FPM to be challenging due to ongoing smartphone weakness.
- Smartphone CCM: Despite margin and average selling price (ASP) pressures, the company expects steady growth in smartphone CCM. They plan to expand India capacity from 6KK/m to 8KK/m by end of 2022.
- Auto/loT CCM: Sales mix is expected to reach 5% in FY22E, up from 2–3% currently. Q Tech has delivered projects for XPeng, Geely, and SGMW in the auto segment. For IoT, the company has started shipments of VR products in Mainland China and Taiwan.
- FPM: Q Tech has gained market share, with 3.2% QoQ and 21.1% YoY growth in shipments in May. Smaller suppliers are being squeezed out, and large customers are consolidating supply chains with top-2 FPM suppliers.
- Valuation and Strategy: The target price (TP) is HK$8.6, representing a 39% upside from the current price of HK$5.5. The company is expected to benefit from smartphone recovery, A-share spin-off, and Newmax integration, which are seen as key catalysts.
- Financial Performance: Revenue is expected to grow steadily, with a target of 21,502 RMB mn in FY24E. Net income and EPS are projected to increase, with 1,244 RMB mn in FY24E and 1.06 RMB cents in FY23E.
- P/E and P/B: The company's P/E is 6.3 in FY22E, and the P/B is 1.0, indicating a discounted valuation.
- Catalysts: Upcoming catalysts include Samsung order ramp-up and A-share spin-off, which could drive future earnings growth.
Key Financial Figures
| Financial Metric |
FY20 |
FY21 |
FY22E |
FY23E |
FY24E |
| Revenue (RMB mn) |
17,400 |
18,663 |
19,241 |
20,132 |
21,502 |
| YoY Growth (%) |
32.1 |
7.3 |
3.1 |
4.6 |
6.8 |
| Net Income (RMB mn) |
840 |
863 |
846 |
1,006 |
1,244 |
| EPS (RMB cents) |
71.9 |
73.2 |
71.7 |
85.3 |
105.5 |
| YoY Growth (%) |
51.1 |
1.8 |
-2.0 |
18.9 |
23.7 |
| P/E (x) |
6.3 |
6.2 |
6.3 |
5.3 |
4.3 |
| P/B (x) |
1.4 |
1.1 |
1.0 |
0.9 |
0.7 |
| Net gearing (%) |
35 |
38 |
48 |
47 |
47 |
Share Performance
| Period |
Absolute Return (%) |
Relative Return (%) |
| 1-month |
16.7 |
3.7 |
| 3-months |
-10.1 |
-15.2 |
| 6-months |
-53.3 |
-38.3 |
Shareholding Structure
| Shareholder |
Ownership (%) |
| He Ningning |
64.28 |
| Vanguard Group |
1.15 |
| Harvest Fund Mgmt. |
1.01 |
Valuation Analysis
- Target Price (TP): HK$8.6 (10x FY22E P/E)
- Current Price: HK$5.5
- Up/Downside: +58%
- 12M Forward P/E Band: 10.5x to 11.3x
- 12M Forward P/B Band: 0.7x to 1.1x
Industry and Peer Comparison
- BUY Rating: Q Tech is rated BUY with TP of HK$8.6.
- Peer Comparison: The report compares Q Tech with other companies such as FIT Hon Teng, AAC Tech, Sunny Optical, Tongda, BYDE, TK Group, FIH, and Truly, highlighting Q Tech's growth potential and valuation.
Financial Summary
Income Statement (RMB mn)
| Metric |
FY20 |
FY21 |
FY22E |
FY23E |
FY24E |
| Revenue |
17,400 |
18,663 |
19,241 |
20,132 |
21,502 |
| Cost of Sales |
(15,630) |
(16,901) |
(17,497) |
(18,190) |
(19,235) |
| Gross Profit |
1,771 |
1,762 |
1,744 |
1,943 |
2,266 |
| Operating Profit |
1,046 |
1,039 |
1,010 |
1,188 |
1,460 |
| Net Profit |
840 |
863 |
846 |
1,006 |
1,244 |
Cash Flow Summary (RMB mn)
| Metric |
FY20 |
FY21 |
FY22E |
FY23E |
FY24E |
| Net Cash from Operating |
3,604 |
1,596 |
2,428 |
691 |
2,961 |
| Capex |
(523) |
(1,558) |
(962) |
(1,007) |
(1,075) |
| Net Cash from Investing |
(696) |
(880) |
(962) |
(1,007) |
(1,075) |
| Net Borrowings |
(1,015) |
604 |
768 |
370 |
458 |
| Net Change in Cash |
1,593 |
(226) |
2,017 |
(199) |
2,036 |
Balance Sheet (RMB mn)
| Metric |
FY20 |
FY21 |
FY22E |
FY23E |
FY24E |
| Total Assets |
11,403 |
13,048 |
14,680 |
16,171 |
18,068 |
| Total Liabilities |
7,617 |
8,343 |
9,298 |
9,984 |
10,886 |
| Shareholders' Equity |
3,786 |
4,705 |
5,382 |
6,186 |
7,182 |
Key Ratios
| Ratio |
FY20 |
FY21 |
FY22E |
FY23E |
FY24E |
| Gross Margin (%) |
10.2 |
9.4 |
9.1 |
9.7 |
10.5 |
| Operating Margin (%) |
6.0 |
5.6 |
5.3 |
5.9 |
6.8 |
| Net Profit Margin (%) |
4.8 |
4.6 |
4.4 |
5.0 |
5.8 |
| ROE (%) |
22.2 |
18.3 |
15.7 |
16.3 |
17.3 |
Conclusion
- Q Tech is maintained at BUY with a target price of HK$8.6.
- Auto and IoT segments are seen as brighter spots for growth, despite challenges in the smartphone sector.
- The company is expected to recover in 3Q22, with long-term growth driven by strategic initiatives.
- Valuation is discounted, but potential upside is significant due to key catalysts.
- Financial stability is supported by positive cash flow and improving profitability metrics.
