LT growth intact; D/G to HOLD as the company goes through business model transformation

（以下内容从招银国际《LT growth intact; D/G to HOLD as the company goes through business model transformation》研报附件原文摘录）
卓胜微(300782)
Maxscend released its3Q24results.Revenue declined by23%YoY/1%QoQto RMB1.1bn,driven by a weaker seasonality as smartphone demand is notshowing strong recovery.NP declined by84%YoY/55%QoQ to RMB71mn,mainly due to GPM erosion(down4.3ppts sequentially to37.1%)on1)fabramp-up,2)an unfavorable product mix towards higher module shipments,and3)USD/RMB FX impacts.NPM dropped to6.6%from14.3%/32.1%in2Q24/3Q23on lower GPM,higher R&D costs(up66%YoY)and assetimpairment loss.Although Maxscend’s LT growth prospects remain intact,wedowngrade the stock to HOLD on ST pain from business transformation(fabless to fab-lite)that weighs on profitability.TP adjusted to RMB86,corresponding to45x2025E P/E(vs.44.5x before).
Unlike a usual peak season in3Q(40%QoQ growth pre-pandemic in3Q18/19and48%QoQ in3Q23),quarterly sales were flattishsequentially(-1%),showing a weak market demand.Although we haveexpected weakness would be a drag to3Q24sales,top-line growth was stillbelow our/BBG consensus by21%/24%.Therefore,we revise down our2024/25E revenue forecasts by8%/7%,with FY24/25E revenue growthadjusted to4.7%/23%YoY.
Module business to be the key driver of future growth.In9M24,Maxscend saw module revenue contribution increase(43%est.of sales vs.36%in2023)to~RMB1.4bn.We expect module share to increase furtherto49%/55%in2024/25E,as we believe modulization in RFFE industry hasbecome a mainstream trend providing a more integrated solution.
GPM is expected to recover to40%+in2H25.We expect margin to faceongoing challenges in the next2-3quarters,due to capacity ramp-up atXinzhuo and utilization not yet achieving the optimized level(slow recoveryin demand).The margin headwind may persist at least into1H25as thecompany continues to transfer products fabrication to its own production line(est.RMB137mn depreciation in4Q24E and a total of RMB550mn in2024Eper mgmt.).We cut GPM estimates by1.9ppt/1.1ppt for2024/25E.
Downgrade to HOLD,with adj.TP at RMB86,based on45x2025E P/E(close to peers’avg.of~41x2025E P/E).We believe Maxscend mustendure the trials of transformative business model shift through challengesbefore shining bright again on the global stage.Key upside risks:1)faster-than-expected recovery in demand and share expansions and2)depreciation’s less severe impacts on margins;key downside risks:1)slower-than-expected capacity ramp-up,2)weak recovery in demand,and3)escalating geopolitical tensions.