Q-tech announced in-line 1H24 results driven by strong CCM/FPM growth and GPM improvement on smartphone demand rebound, share gains, an increasing UTR and a better high-end product mix. For 2H24/2025, we remain positive on high-end spec upgrade to drive ASP/GPM, auto CCM sales growth to accelerate under rising NEV penetration and ultra-sound FPM upgrade in smartphones. We slightly adjust down FY24-25E EPS by 1-8% to factor in 1H24 results and 2H seasonality, and our new EPS is 19-24% above consensus. The stock now trades at 12.4x/8.3x FY24/25E P/E, which is attractive, vs. our estimated 335%/50% YoY EPS growth in FY24/25E. Our new TP of HK$6.43 is based on the same 13x FY25E P/E. Maintain BUY.
1H24 results in-line; strong shipments with improving GPM on smartphone clients’ share gain, UTR hike and better product mix. Q-tech 1H24 revenue growth of 40% YoY was largely in-line with market expectation, driven by strength across all segments with 30%/100%/17% YoY in smartphone CCM/auto & IoT CCM/FPM shipments. GPM improved 1.8ppts YoY and 0.7ppts QoQ to 5.2%, and mgmt. attributed the increase to: 1) global smartphone market rebound and share gain in major smartphone brands; 2) higher-margin auto and IoT CCM shipment growth; 3) an improving UTR; 4) share of high-end products (32MP+) sales rose to 49.2% in 1H24, in which share of OIS/periscope CCM sales reached 12%/ 0.7% and periscope recorded 100%+ YoY growth. Overall, NP growth of 431% YoY was in-line with prior profit alert on revenue growth and GPM improvement.
2H24E/2025 outlook: high-end products to boost ASP/GPM; auto CCM to accelerate; ultra-sound FPM upgrade. Q-Tech also announced that 1) smartphone CCM shipment in July recorded 5.5% YoY and 1.5% MoM growth, suggesting on-going Android recovery and inventory restocking; 2) FPM CCM in July achieved 58% YoY and 8.3% MoM growth given the smartphone demand rebound and market share gains. For 2H24E/2025, we are positive on a rising share of high-end CCM sales to drive better ASP/GPM on high-end spec upgrade especially in OIS/periscope. We also expect rising UTR/GPM given better customer demand under the smartphone replacement cycle. As for non- mobile CCM, we expect auto CCM biz will accelerate driven by rising NEV penetration, increasing demand for ADAS/surround view/smart cockpit camera modules and domestic/overseas Tier-1 customers’ project wins. In addition, we remain positive on ultrasound FPM’s application upgrade in smartphones.
Maintain BUY. We are positive on high-end upgrade to drive ASP/earnings improvement and auto CCM/ultra-sound FPM to drive overall growth in 2H24/2025. We slightly revise down our FY24-25E EPS by 1-8% (but still above consensus by 19-24%) to factor in 1H24 results and 2H seasonality. Our new TP of HK$6.43 is based on the same 13x FY25E P/E. Maintain BUY.