AAC Technologies (2018 HK) Summary
Core Content
AAC Technologies is a leading player in the hardware technology sector, with a strong growth trajectory and promising expansion into new markets, particularly in the area of Android 3D sensing. The report highlights the company's robust product roadmap and its potential to benefit from emerging technologies such as dual-cameras, 3D sensing, ADAS, and drones.
Main Points
- Revenue Growth: AAC Technologies is projected to achieve a strong CAGR of 33% for revenue and 38% for net profit from FY17 to FY19.
- Optics Expansion: The company is expected to gain significant traction in the optics segment, particularly with the adoption of hybrid lenses (WLG + plastics) for rear-cameras and 3D sensing applications. The report anticipates these lenses will be mainstream in the emitter module for Android 3D sensing by 2H18.
- Strategic Partnerships: AAC is expected to partner with O-Film for modules and Mantis Vision for algorithms, giving it a competitive edge over other Android camps such as Qualcomm + Himax + Truly and AMS + Sunny Optical.
- Earnings Revisions: The report has raised the FY18E and FY19E EPS by 3% and 8% respectively, reflecting the potential of Android 3D sensing.
- Valuation and Target Price: The target price (TP) has been lifted to HK$195, which is 40% higher than the current price of HK$139.6, based on a 25x FY18E upcycle P/E. This TP is 9-16% above the consensus estimate.
- Upcoming Catalysts: Key upcoming catalysts include iPhone 8/X shipments, client wins in plastic lenses and WLG, and improving margins.
Key Financial Highlights
Revenue and Profit Growth
| Metric |
2017E (RMB mn) |
2018E (RMB mn) |
2019E (RMB mn) |
| Revenue |
21,086 |
28,981 |
37,292 |
| Net Profit |
5,477 |
7,991 |
10,371 |
| Revenue CAGR (FY17-19) |
33% |
38% |
- |
EPS and Margins
| Metric |
2017E (RMB) |
2018E (RMB) |
2019E (RMB) |
| EPS |
4.46 |
6.51 |
8.45 |
| Gross Margin |
41.4% |
42.0% |
42.4% |
| Net Margin |
26.0% |
27.6% |
27.8% |
Valuation Ratios
| Ratio |
2017E (x) |
2018E (x) |
2019E (x) |
| P/E |
26.2 |
17.9 |
13.8 |
| P/B |
7.8 |
5.8 |
4.4 |
| ROE |
29.8% |
32.5% |
32.0% |
Key Data
| Metric |
Value (HK$) |
| 52-week range |
66.5–185.0 |
| Market Cap |
171,813 mn |
| Avg. Daily Volume |
5.74 mn |
| BVPS (RMB) |
11.6 |
Investment Rating
- Company Rating: BUY
- Industry Rating: OVERWEIGHT
Shareholding Structure
| Shareholder |
Percentage |
| CHUNYUAN WU |
21.5% |
| ZHENGMIN PAN |
19.0% |
| Shares Outstanding (mn) |
1,222.0 |
| Free Float |
59.39% |
Sector Valuation Comparison
| Company |
Target Price (HK$) |
Upside (%) |
P/E (x) |
P/B (x) |
ROE (%) |
| AAC |
195.00 |
40% |
17.9 |
5.8 |
32.5% |
| Sunny Optical |
157.00 |
55% |
21.5 |
8.6 |
40% |
| Tongda |
2.66 |
39% |
10.7 |
2.0 |
22% |
| FIT |
6.00 |
16% |
54.5 |
9.1 |
15% |
| Cowell |
4.05 |
55% |
5.8 |
0.8 |
15% |
| Truly |
2.75 |
-17% |
13.2 |
1.1 |
14% |
| ZTE |
N/A |
N/A |
20.8 |
2.7 |
14% |
| Q-tech |
N/A |
N/A |
20.0 |
4.9 |
27% |
| BYDE |
N/A |
N/A |
10.7 |
2.0 |
20% |
| FIH |
N/A |
N/A |
N/A |
3.1 |
3% |
| JuTeng |
N/A |
N/A |
8.7 |
0.4 |
4% |
Financial Statements Highlights
Balance Sheet
| Item |
2017E (RMB mn) |
2018E (RMB mn) |
2019E (RMB mn) |
| Total Assets |
28,575 |
37,248 |
46,354 |
| Total Liabilities |
10,197 |
12,631 |
13,923 |
| Total Equity |
18,352 |
24,591 |
32,404 |
Cash Flow
| Item |
2017E (RMB mn) |
2018E (RMB mn) |
2019E (RMB mn) |
| Net Cash Flow |
-1,470 |
117 |
4,118 |
Income Statement
| Item |
2017E (RMB mn) |
2018E (RMB mn) |
2019E (RMB mn) |
| Revenue |
21,086 |
28,981 |
37,292 |
| Net Profit |
5,477 |
7,991 |
10,371 |
Conclusion
AAC Technologies is well-positioned for growth with its expansion into Android 3D sensing and its strong product roadmap. The company's improved earnings, strategic partnerships, and potential for higher margins make it an attractive investment. With a target price of HK$195, the report reiterates a BUY recommendation, highlighting the company's strong leadership and diversification in the hardware technology sector.
