Q TECHNOLOGY(1478.HK)：CORP DAY TAKEAWAYS：HEADWINDS REMAIN AUTO／IOT THE BRIGHTER SPOT-格隆汇

机构：招银国际
研究员：Alex Ng/Hanqing Li

We hosted an investor call with Q Tech during our Technology Corporate Day.
While mgmt. is confident on 100%+ YoY growth in IoT/Auto CCM, they stated that previous guidance of 10% YoY in CCM and 20%+ YoY in FPM will be challenging to achieve due to ongoing smartphone weakness. In particular, mgmt. remains cautious on demand recovery in July and August due to weak seasonality, while holding a positive view on auto CCM progress and IoT upside.
We maintain BUY on Q-Tech with TP of HK$8.6 (based on 10x FY22E P/E).
Smartphone CCM: steady growth despite margin/ASP pressure. Despite industry headwinds, mgmt. expected to expand India capacity from 6KK/m to 8KK/m by end of 2022. Mgmt. believes CCM order will maintain steady growth backed by leading market position and strong customer relationship despite margin/ASP pressure on de-spec cycle.
Auto/IoT CCM: sales mix to reach 5% in FY22E. Overall, mgmt. is positive on progress on Auto/IoT CCM order win, and sales contribution will increase from 2-3% currently to 5% in FY22E. For auto CCM, Q-tech delivered projects for XPeng, Geely and SGMW. GPM will remain at low single digit for now and target to reach company’s average in FY23E. For IoT CCM, Q-tech started small amount of shipments clients in Mainland China (VR products) and Taiwan.
Fingerprint Module (FPM): market share gain to continue. FPM shipment in May was up 3.2% QoQ and 21.1% YoY, better than expected and mgmt. attributed it to the production resumption after lockdown and continuous market share gain. Smaller suppliers were squeezed out of the market due to intense competition, and large customers are consolidating their supply chains with top-2 FPM suppliers
No impact from inflationary cost and FX; Maintain BUY. Mgmt. expected limited pressure from inflation, and Q-Tech has agreement with customers to pass on the higher cost as FX fluctuates. Overall, we believe 3Q22 will be trough for Q-tech, and we remain positive on Q-tech strategy to expand into Auto/IoT CCM businesses. Maintain BUY with TP of HK$8.6 (based on 10x FY22E P/E).