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Q Tech Group:Sunny 2.0to be borne

2017-08-18 00:00:00 来源:信达国际控股
信达国际控股 更多文章>>

1H17beats on GM and ASP, shipment guidance maintained

Q-tech has handed in a set of excellent 1H17results with sales and net profit accounted for 44.6% (3-year avg. at ~40%) /53.0% (3-year avg. at ~50%) of our FY17E forecasts respectively, while GPM was up 280bps to 12.1% which well exceeded both FY17E Bloomberg consensus (9.5%) and our estimates (9.3%). The upbeat in GM was driven by improving product mix, economy of scale and a stabilizing RMB in 1H17led to lower raw material costs. Top 5clients accounted for ~82% of Q Tech’s total CCM shipment in 1H17, with vivo & OPPO continue to contribute >50% of company’s total shipment.

In 1H17,Q-tech’s total shipment grew by 56%, driven by 15% Yoy growth in HCM shipment to 83.4mn pieces (38% of FY17E guidance, 33% of our estimates vs. ~41% in 1H16), while fingerprint recognition (FRM) soared >20x Yoy to 34.3mn pieces (29% of total shipment, 57% of FY17E guidance). Management maintained previous guidance of ≧ 25% in CCM shipment and 60mn FRM module shipment in FY17E. Q-tech’s blended ASP rose 34% Yoy, thanks to 35.5% increase in CCM ASP which came in at RMB30.9. We continue to see Q-tech’s ASP possesses upside potential driven by pixel migration and roll out of upgrade products (e.g. MOC)Successful entry into Huawei direct supply chain; Explore international clients’ and expand areas of product application;

As mentioned in our report in Apr 2017, we expect Q-tech would enter into Huawei high-end smartphone supply chain and management confirmed that they have already obtained certification from Huawei in 1H17, we expect Q tech to supply single camera modules from 2H17, followed by dual-cam modules at next stage, which we believe is a normal ramp up process for new suppliers. This reflects Huawei’s confidence in Q Tech’s design and execution capability, Q tech continues to seek for client diversification as well as expanding areas of product application such as AR/VR and automobiles etc.

Upstream acquisition to enhance long term competitiveness;

In Mar 2017, Q-Tech announced to acquire 36% stake in Newmax Technology (3630TT) for RMB283mn through a possible private placement, which will be financed by internal funding (1H17FCF ~RMB980mn). Upon completion, Q Tech would be the controlling shareholder. The deal is still pending approval from Taiwan authority. As Newmax specializes in optical lens for consumer electronics such as PCs, tablets, smartphone and game console (Microsoft Xbox), as well as automobiles, we believe this would create good synergy for both companies in the long run through increasing self-operating efficiency and expand current clientele.

New earnings upgrade cycle continue to favour re-rating, Initiate Buy with TP$16.44

Q-tech’s share price rocketed >150% YTD, due to market’s anticipation of Q-tech’s improving earnings momentum. We expect Q-tech’s FY16-18E EPS to grow >80% CAGR vs. >50% in our last update, driven by new product sales, GM expansion and operating leverage through economy of scale, we value Q-tech’s TP at HK$16.44(which implies FY18E 20.5x PE) based on FY18E EPS and 20% discount to leading players’ average valuation (including Sunny Optical (2382.HK), O-film (002456CH) and LG Innotech (011070KS) etc). We Initiate Q-tech with BUY.





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