AAC reported a positive profit alert with 2024 earnings growth of 130-145% YoY to RMB 1.7bn-1.82bn, with mid-point in-line with our estimates and 5% above consensus. The strong results were driven by global smartphone recovery, spec upgrade across segments (acoustics/MEMS/haptics/thermal/optics), auto acoustics PSS integration and improving efficiency. Looking ahead to 2025, we believe AAC will continue to benefit from content value increase in AI/foldable phones (acoustics/MEMS/thermal/haptics/hinge/optics), AI smart glasses (MEMS/acoustics), and order wins in auto acoustics (Xiaomi/HW/Li/XPeng). We raise FY24-26E EPS by 1-4% for spec upgrade and improving margins in optics/ acoustics/MEMS, and we lift our SOTP-based TP to HK$53.48, implying 25.2x FY25E P/E. Catalysts include AI/foldable phone launches, new AI glasses and auto acoustics order wins. Maintain BUY.
　　Positive 2024 profit alert driven by spec upgrade, PPS and improvingmargins. AAC posted a positive FY24E profit alert, stating earnings growth of 130-145% YoY, backed by recovery in global smartphone market, spec upgrade and a better product mix across various segments, auto acoustics (PSS) consolidation and enhanced operating efficiency.
　　2025 outlook: AI/foldable phones, iPhone 17, AI smart glasses, PSSorder wins. Mgmt. expected 10%+ YoY sales growth in 2025 with GPM target of 22-25%. We expect AAC will benefit from 1) AI phones boosting VC adoption and MEMS upgrade, 2) foldable phones for hinge/ acoustics/ haptics upgrade, 3) new iPhone 17 Air to drive modularization of acoustics/ MEMS/haptics, 4) AI smart glasses for MEMS microphone growth, 5) optics upgrade to 7P/WLG hybrid lens and share gain in HLS/HCM/WLG with GPM expansion, and 6) PSS’s domestic client/order wins (e.g.Xiaomi/HW/ Li/XPeng) on top of its leadership in the overseas market.
　　Overall, we expect AAC’s earnings to grow 28%/21% in FY25E/26E.
　　Multiple catalysts ahead; Raise TP to HK$53.48. We are positive on AACgiven its solid earnings growth, backed by content value increase in AI/foldable phones (acoustics/MEMS/thermal/haptics/hinge/optics), a better product mix and improving margins in acoustics/optics segments. We lift our FY24-26E EPS forecasts by 1-4% to reflect AI/foldable phone spec upgrade in acoustics/haptics/MEMS/optics and a better margin profile. Our new SOTP-based TP of HK$53.48 implies 25.2x FY25E P/E. Maintain BUY.
　　Upcoming catalysts include AI/foldable phone launches, new AI glasses and auto acoustics order wins.