Despite 1H23 results miss (link), mgmt. guided 1) in-line double-digit growth for FY23E revenue, 2) shipment recovery and stabilised ASP, 3) UTR and cost control measures to drive margin recovery in 2H. In addition, mgmt. expects continued overseas expansion and OLED/Mini/LTOP products to drive growth into FY25E. We lowered our FY23-25E EPS by 8-14% mainly to reflect 1H23 auto OEM price war and rising costs from capacity ramp-up. Trading at 8.8x/7.1x FY23/24E, we think the stock is attractive. Reiterate BUY with our new TP of HK$21.53.
　　Shipment recovery with stabilised ASP; rising UTR and cost control to　drive margin recovery in 2H23E. During earnings call, mgmt. guided double-digit growth for FY23E revenue, which is in-line with prior guidance at beginning of 2023. Mgmt. also expects shipment recovery ahead of ASP stabilisation in 2H backed by close partnership with customers, order ramp- up, strong customer demand for system products and overseas customers new order wins. In addition, Chengdu plant UTR improvement and cost control measures will likely drive margin recovery in 2H23E.
　　2025 roadmap remains unchanged: overseas expansion and solid product pipeline (OLED/Mini/LTOP) to drive growth. Mgmt. maintained　guidance of HK$20bn revenue target in 2025 (23% CAGR in FY22-25E) and overseas sales mix to reach 50% in 2025. Mgmt. believes system sales to contribute significantly to FY25E sales driven by accelerated overseas expansion. In addition, mgmt. reiterated that rising penetration of OLED/Mini/LTOP products into Chinese and overseas customers will become another major growth driver in the future.
　　Other key highlights. 1) Total/medium-to-large size shipment/shipment area global no.1 market share in 1Q23; 2) Chinese automobile product coverage rate reached 50% in 1H23 (vs. 30% in 1H22); 3) Chinese mainstream new energy vehicle product coverage rate reached 60% in 1H23 (vs. 41% in 1H22); 4) Chengdu plant capacity to reach 15mn+ pieces within this year.
　　Reiterate BUY with new TP of HK$21.53. We believe 1H23 margin pressure　has been partially priced in, and order wins and Chengdu plant ramp-up will boost margin recovery in 2H23E. In long term, we think BOEVx will benefit from auto display upgrade and overseas expansion given auto intelligence and smart cockpit trend. We lowered our FY23-25E EPS by 8-14% to reflect auto OEM price war and rising costs from capacity ramp-up. Reiterate BUY and our new TP of HK$21.5 is based on rolled-over 20x FY24E PE.