According to a research report, Tianfeng Securities released a “buy” rating to Gaowei Electronics (01415). The estimated revenue for 2023/24/25 is 79.64/165.93/24.101 billion yuan, respectively, net profit of 599/11.78/1,752 million yuan, and a target price of HK$29.81. The bank expects the company to introduce the iPhone rear camera module business and benefit from the subsequent growth of Apple's VisionPro. Additionally, it expects lidar products to increase in volume, or open up the company's second growth curve.
Tianfeng Securities's main views are as follows:
An established optical module supplier, Lijing has taken the initiative to promote business integration and expansion.
The company is a supplier of precision optical modules for electronic mobile devices. Since 2009, Apple has purchased camera modules produced by the company and has become the company's biggest customer. In 2020, Lijing Innovation (Mr. Wang Laixi, Jingshan and Guangbao hold about 53.41%, 43.66% and 2.93% of the shares respectively) joined Gaowei Electronics, and the board members and structure were completely reorganized. It is closely tied to the business of major customers, and the company's revenue and net profit are increasing year by year. Gross profit margin has remained stable in recent years, and net interest rate has shown an upward trend. In 2022, the company's capital expenditure increased 252% year on year, and continued to increase business R&D and innovation.
It is closely tied to the business of major customers, and innovation drives new camera growth.
In 2023, in anticipation of a slow stabilization of the global economy, mobile phone camera module shipments will increase by 3.6% per year to 4.62 billion units. The size of the camera module market is expected to grow from 49.46 billion US dollars in 2023 to 76.10 billion US dollars in 2028, with a compound annual growth rate of 9%. The global camera module market CR5 is 59%, and Gaowei's share is only 2% (20 years). The entry barrier for Apple's FC camera packaging technology is high, and Gao Wei's technical advantages build a moat. As Ophelia withdrew from Apple's supply chain, the company's market share is expected to increase. Benefiting from the vertical integration of CCM and VCM, it may become one of the winners of this upgrade. Furthermore, the market space for Apple's rear camera module is considerable (the value of a stand-alone camera is nearly 100 US dollars, and the estimated total market space is 22.1 billion US dollars), and Gao Wei is expected to be selected as Apple's rear camera module supplier.
Apple's new MR products may drive the company's revenue increase.
The number of camera modules in the Apple Vision Pro is as high as 12, or is exclusive to Gaowei Electronics. The bank believes that the indirect relationship between Gaowei Electronics and Lixun Precision may seek more voice for Gao Wei in the new Apple MR product market. Continuously optimistic that VisionPro will open the era of spatial computing, industrial space is expected to benchmark PCs and smartphones. With future Apple MR shipments, the company's revenue will show new growth points.
Joining hands with Suteng to open up a lidar racetrack to help the company grow for the second time.
Vehicle lidar is considered to be an essential sensor for autonomous driving with L3 level or higher. As of the third quarter of 2023, 36 Chinese car companies have announced the use of lidar. It is estimated that up to 106 models equipped with lidar will be launched in China, accounting for nearly 90% of the total number of new models that are expected to be released with lidar in the same period in the world. The automotive lidar market continues to grow, driven by demand for passenger cars and robotaxis. It is estimated that 3% of passenger cars in China will reach L3 assisted driving level in 2023. Lixun actively explores automotive industry chain restructuring and emerging business expansion trends (Lijing Innovation and Suteng Juchuang establish a joint venture company, Liteng Innovation). Gaowei Electronics in the Lixun Group system also benefited, winning module OEM orders from Suteng Juchuang Radar.
Risk warning: shipments of mobile phones and MR products from major customers fell short of expectations; competition in the lidar industry intensified; the boom in the consumer electronics industry fell short of expectations; competitive pressure on a new Android phone increased; the company's R&D fell short of expectations