20220428-招银国际-歌尔股份-002241.SZ-Strong_VR_momentum_into_2H22E__Maintain_BUY_6页_1mb

Goertek (002241 CH) Company Update Summary

Core Content

Goertek reported strong financial performance in 1Q22, with revenue and recurring net profit growing by 43% and 46% YoY respectively, driven by robust growth in the smart product segment, particularly VR (Quest 2) and gaming console (PS 5). The company also released an upbeat 1H22 profit alert, indicating net profit growth of 20-40% YoY, which implies a 54-99% YoY increase in 2Q22 net profit. The company's earnings visibility and product roadmap in AR/VR and gaming console segments are strong, leading to the maintenance of a BUY rating and an increased target price to RMB48.0.

Main Points

• 1Q22 Performance:

  • Revenue: RMB20.1bn (up 43% YoY)
  • Recurring Net Profit: RMB878mn (up 46% YoY)
  • The growth was primarily attributed to the strong performance of the smart product segment, which includes VR, gaming console, and smart watch.

• 1H22 Profit Alert:

  • Net profit is expected to be in the range of RMB2.08-2.42bn, up 20-40% YoY.
  • This implies a 59-99% YoY growth in 2Q22 net profit, with a mid-point of 33% above the consensus estimate.

• 2H22E Outlook:

  • Expected continued growth momentum from new product launches such as new-gen AirPods, Quest 2 Pro, and PS VR2.
  • The smart product segment is expected to grow by 62% and 26% YoY in FY22E and FY23E, respectively.
  • These segments are projected to account for 51% of FY22E sales, highlighting their importance as growth drivers.

• Earnings and Valuation:

  • The company's earnings are expected to grow by 33% and 21% in FY22E and FY23E, respectively.
  • The current P/E ratio for FY22E is 17.7x, which is considered attractive given the 21% CAGR in earnings and improving ROE.
  • The target price of RMB48.0 represents a 58% upside from the current price of RMB30.39, based on a 28x FY22E P/E ratio.

• Key Financial Metrics:

  • Revenue is projected to grow from RMB57,743mn in FY20 to RMB138,872mn in FY24E.
  • Net profit is expected to increase from RMB2,848mn in FY20 to RMB8,610mn in FY24E.
  • EPS is forecasted to rise from RMB0.89 in FY20 to RMB2.52 in FY24E.
  • The P/B ratio is expected to decrease from 5.0x in FY20 to 2.3x in FY24E.
  • ROE is projected to increase from 14.4% in FY20 to 18.8% in FY24E.

• Target Price and Rating:

  • The target price has been revised to RMB48.0, up from RMB46.9.
  • The BUY rating is maintained due to strong product momentum and earnings visibility.

Key Information

• Shareholding Structure:

  • Weifang Geer Group: 14.97%
  • Jiang Bin: 8.41%
  • HKEX: 7.50%

• Stock Performance:

  • 1-month: -25.77%
  • 3-month: -43.00%
  • 6-month: -36.79%
  • 12-month: Price performance chart (source: Bloomberg)

• Valuation Comparison:

  • The company's P/E ratio is lower than the historical average, making it an attractive investment opportunity.
  • The P/B ratio is also improving, indicating better value.
  • The ROE is on an upward trend, reflecting improved profitability.

Summary

Goertek has demonstrated strong financial performance in 1Q22 and is expected to continue its growth momentum in the second half of 2022, driven by its leading positions in VR, gaming console, and smart watch segments. The company's earnings are projected to grow significantly, with a strong upside potential based on the revised target price. Despite recent market concerns, the current valuation appears attractive, and the BUY rating is maintained. The company's financial health, as reflected in its improving ROE and decreasing P/B ratio, supports its long-term growth prospects.