20230808-招银国际-丘钛科技-01478.HK-Expect_better_client_demand_in_2H__high-end_CCM_to_drive_ASP_GPM_upside_8页_1mb

Q-Tech (1478 HK) received a "Buy" rating from CMB International Global Markets, maintained from prior reports. The firm sets a new target price of HK$3.60, up 8.4% from current levels, based on a 10x forward P/E for FY23E.

First-half 2023 performance showed a sharp revenue decline of 22.8% YoY due to FX impacts and fair value changes, missing profit warnings but still above CMBIGM's estimates. Despite this, the 32M+ CCM shipment mix reached 37.1%, exceeding guidance (35%+), and non-smartphone CCM shipments grew 64% YoY (vs. 50%+ YoY guidance), driven by strong auto CCM. Gross profit margin dropped to 3.4% YoY, impacted by smartphone weakness and fierce competition, leading to a 86.9% YoY net profit decline.

Outlook for 2H23E is bullish: management expects recovery in shipment and earnings from inventory restocking, Android smartphone sales, and spec upgrades (OIS/periscope), improving retention rates (UTR) and easing competition. China smartphone market conditions improved, and Q-Tech's focus on high-end CCM and non-smartphone segments (e.g., auto, AR/VR, IoT) positions it for growth, with auto CCM likely up over 100% YoY. Non-smartphone CCM shipments are anticipated to grow 100% YoY in the second half.

Valuation indicates the stock trades at 9.2x/5.6x FY23/24E P/E, close to 1-year moving average forward P/E, presenting an attractive opportunity. The buy recommendation stems from expected inventory restocking and spec upgrades benefiting Q-Tech; risks include potential competition and market volatility.

Peer comparison shows Q-Tech as potentially outperforming, with peers like FIT Hon Teng and BYDE rated "Buy"; however, competitors like AAC Tech are "Hold." Financial metrics include trailing P/E of 4.7% for FY20-22, but projected recovery in margins and revenue. Disclosure notes standard risks: past performance not indicative, no tailored advice, and conflicts possible due to CMBIGM's business relationships.

Maintain Buy; target price HK$3.60.