22Jan2025
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
Willsemi(603501CH)
Expectsequentialimprovementahead
WillsemireleasedFY24prelimresults.Rev.isexpectedtogrowby20.9%to
22.8%YoYtotherangeofRMB25.4bntoRMB25.8bn,drivenbyahigher
penetrationrateofCISproductsinhigh-endsmartphonemarket(smartphone
CIS:52%ofCISrevenuein1H24)andautonomousdriving(AD)tech(autoCIS:
31%).Mid-pointrev.wasslightlybelowBBGconsensus/ourestimateby
3.2%/2.6%.NetprofitisexpectedtobebetweenRMB3.2bnandRMB3.4bn,up
468%to504%YoY,whichmgmt.attributedtomarketshareexpansion(11%of
globalCISmarketin2023perYole)andimprovedGPM(9M24/FY23:
29.6%/21.8%).Lookingforward,weexpectWillsemitobeakeybeneficiaryof1)
domesticconsumersubsidyplanand2)rapidexpansionofseveralkeymarkets,
suchasEVs(AD),edgeAI(e.g.AIglasses,XRheadsets),robotics(e.g.humanoid
&industrialrobots),etc.MaintainBUY,withTPunchangedatRMB130.
Sustainedsequentialgrowthdrivesstrong2024performance.4Q24mid-
pointrevenueisexpectedtobeRMB6.7bn,up12.8%YoYbutdown1.7%
pointrevenueisexpectedtobeRMB6.7bn,up12.8%YoYbutdown1.7%
QoQ,afterarecord-highquarterlyrevenueatRMB6.8bnin3Q24.Revenue
grewsequentiallyin2Q/3Q24by14.2%/5.7%onthecompany’s1)continued
marketshareexpansioninflagshipsmartphonemodelswithpremium
productssuchasOV50H/OV50K40,2)robustcamerashipmentsassmart
drivingsolutions(e.g.,OX08D10)expandedfrompremiummodelstomass-
marketvehicles,and3)increasedintegrationofAI-driventech.
CISrevenueestimatedtogrow26%in2025,drivenbyhighernumberof
camerasusedinEVs/robotaxisandbenefitingfromChinadigital
productsubsidyplan.Auto/smartphoneCISsalesaccountedfor24%/40%
ofthecompany’stotalrevenuein1H24.Wethinkthesetwosegmentswill
continuetobethekeygrowthdrivers,with35%/23%revenuegrowthprojected
for2025E.Weseethenumberofsensorsadoptedinvehiclesgrowing
significantlyforsafetyconcerns.Itiscommontosee10+camerasonvehicles
(Alphabet-ownedself-drivingcarcompanyWaymohasthemostwith29
cameras).AsforsmartphoneCIS,wethinkWillsemiwillbeakeybeneficiary
ofChina’snewconsumersubsidyplan,whichoffers15%subsidieson
smartphones,tabletsandsmartwearablespricedbelowRMB6k(~US$830)
foruptoRMB500.Weexpecttheplantostimulatedemand.
Continuedgrowthdrivenbymarketshareexpansionandrisingdemand
acrosskeysegments.Webelievethecompanyissetforfurthergrowth
drivenbymarketsharegainsandrisingdemandacrossseveralmarkets.
Meanwhile,giventheintensifiedcompetition,localOEMsarealsolookingfor
domesticcomponents/solutions,benefittingWillsemiandotherChinese
names.ThestockiscurrentlytradingatRMB108.3,est.38x2024P/Eor26x
2025EP/E.Weforecast2025EPSgrowthtoexceed40%.MaintainBUY,
withTPatRMB130,correspondingto31.7x2025EP/E.