Sequential margin contraction indicates inventory digestions may persist till FY23E

（以下内容从招银国际《Sequential margin contraction indicates inventory digestions may persist till FY23E》研报附件原文摘录）
韦尔股份(603501)
Willsemi’s 1H23 revenue and net profit were RMB8.9bn and RMB153mn, down20% and 93% YoY, respectively. Margin continued to contract in 2Q23,suggesting the Company is marking efforts to digest inventory. 2Q NP wasnegative again, failing to continue its profitability from 1Q. This has confirmedour previous prediction that “inventory digestion continues, however, notnecessary a hint of market turnaround”. (link) Looking forward, we think the destocking process is likely to persist till the end of the year, which will continue tohurt the Company’s overall margin. Maintain HOLD, with adjusted TP at RMB85.
Margin erosion in a declining market (mobile/security CIS). 2Q’s GPMdropped to 17.3% from 24.7% in 1Q23 and 33.3% in 2Q22, mainly due toweak mobile and security market demand and inventory digestion.Mobile/security sensor sales declined 45%/23% in 2022 and furtherdeclined 14%/25% YoY in 1H23. Inventory was RMB9.8bn, down by 30%from the peak in 3Q22. However, MOI (months of inventory) was still 6M.As de-stocking will continue into 2H23, we expect the overall GPM willremain under pressure. Once the inventory is back to normal level (3-4M),GPM can be expected to gradually return to previous 30% level.
We are more conservative than the consensus as we expect a gradualrecovery in 2024. Counterpoint estimated smartphone shipment willdecline 6% to 1.15bn in 2023, “worst in ten years”, remain cautious on 1Q24and show elevated risk of a delayed recovery into next year. GivenWillsemi’s large inventory and low consumer sentiment, we expect totalrevenue will decrease modestly by 5% in 2023. Recovery may come in2024, when the Company’s sales resume double-digit growth. 2024/25Erevenue is estimated to reach RMB22.9bn/RMB26.4bn, which is 11%/14%lower than consensus.
Maintain HOLD with TP adjusted to RMB85, based on rollover 29.3x(unchanged) FY25E P/E. Current price is trading at 55x 24E P/E and 32x25E P/E, which is fair valued. We think investors should watch Willsemi’sGPM trend and inventory levels in the following quarters. Potential upsideincludes earlier-than-expected consumer demand recovery, better sales ofnew products.