【行业研究报告】丘钛科技-Weak 2H22 as expected; IoT/auto CCM poised to drive recovery in 2023

26Jan202326Jan2023CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateQ-Tech(1478HK)Weak2H22asexpected;IoT/autoCCMpoisedtodriverecoveryin2023WebelieveQ-Tech’sFY22profitwarning(70-80%YoYdecline)isnotsurprisinggiven1)1H22earningsdeclineof72%YoY,2)2H22CCMshipmentweakness(-17%YoY,vs-5%in1H22)and3)marginpressureonlowutilizationandloss-makingIoT/autoCCMbiz.Lookingahead,whilehandsetCCM/FPMshipmentwillremainmutedin2023,webelieveIoT/autoCCMwillbecomemajorsalesgrowthdriverswith204%/130%YoYinFY23/24E(vs+1%/4%formobileCCM),accountingfor10%/19%ofsalesinFY23/24E(vs3%inFY22).WeslightlyadjustedFY23/24EEPSforstrongerIoT/autoCCM,andreiterateBUYwithnewTPofHK$5.76,basedonsame10xP/E.Upcomingcatalystsinclude1Qshipmentrecovery,autoCCMproductlaunchandA-sharespin-off.FY22profitwarningnotsurprisinggiven2H22smartphoneweakness.Q-techannouncedFY22profitwarning,stating70-80%YoYearningsdecline,largelyin-linewithourestimatesof-68%YoY(priorest.-72%/-63%in1H/2H22),givencontinuedsmartphoneCCM/FPMweaknessin2H22.Overall,webelieveFY22resultsiswellexpectedandreflectedinstockprice.HandsetCCM/FPM:mutedgrowthexpectedinFY23E.ForhandsetCCM(82%ofsales),whileweremainpositiveonSamsungorderwinandspecupgradetrendsincludingOIS,SMAandperiscopelenstodriveASPupsidein2023,weexpectshipmentwillremainflattishinFY23Eandestimate1%/4%growthinFY23/24E.ForFPM(8%ofsales),weestimate1%/0%revenuegrowthgivenalackofupgradeandmaturemarket.AutoCCM:emerginggrowthdriverwith10%/19%salesmixinFY23/24E.Q-techwonover20certifiedOEM/Tier-1autocustomerswithprojectsinoperation.WeexpectIoT/autoCCMtodeliver204%/130%YoYsalesgrowthinFY23/24E,accountingfor10%/19%inFY23/24E(vs3%inFY22E).DespiteweakprofitabilityatearlystageinFY22,mgmt.expectedgrossmarginwillimprovewithscaleandreachcorporatelevelinFY23/24Ewhenordersstarttorampupfromnewenergyvehiclecustomers.Theworstisoverin2H22;MaintainBUY.Lookingahead,mgmt.remainspositiveon:1)cameraspecupgradetodriveASP;2)AR/VRsee-throughandpancakelens;and3)newenergyvehicleproductsin2023.Overall,webelievetheworstisoverin2H22andremainpositiveonQ-tech’sIoT/autoCCMbusinessexpansionin2023E.Tradingat8.7xFY23EP/E,webelievethestockremainsattractiveandmaintainBUYwithnewTPofHK$5.76.TargetPriceHK$5.76(PreviousTPHK$5.60)Up/Downside14.8%CurrentPriceHK$5.02ChinaTechnologyAlexNG(852)39000881alexng@cmbi.com.hkHanqingLIlihanqing@cmbi.com.hkStockDataMktCap(HK$mn)5,948.7Avg3mthst/o(HK$mn)4.152wHigh/Low(HK$)9.63/2.90TotalIssuedShares(mn)1185.0Source:FactSetShareholdingStructureHENingning63.6%HarvestFundManagementCoLtd2.7%Source:HKExSharePerformanceAbsoluteRelative1-mth23.3%6.8%3-mth65.1%22.0%6-mth6.4%0.8%Source:FactSet12-mthPricePerformanceSource:FactSetEarningsSummary(YE31Dec)FY20AFY21AFY22EFY23EFY24ERevenue(RMBmn)17,40018,66314,09415,17317,578YoYgrowth(%)32.17.3(24.5)7.715.8Netprofit(RMBmn)840.1862.8230.8563.9938.1EPS(Reported)(RMB)0.720.730.200.480.80YoYgrowth(%)51.11.8(73.3)144.466.4ConsensusEPS(RMB)na0.740.310.530.72P/E(x)5.85.721.38.75.2P/B(x)1.31.01.00.90.8Yield(%)5.40.00.92.23.7ROE(%)25.320.34.811.016.4Netgearing(%)(23.2)(0.8)(24.7)(4.6)(31.6)Source:Companydata,Bloomberg,CMBIGMestimates