Profit warning: FY21 unaudited profit expected to decrease by c. 12% to 16% y-o-y
- FY21 Revenue unaudited profit expected to decline by c.12% to 16% y-o-y, missing market consensus by 25% to 28%
- The unsatisfactory performance was mainly due to weak smartphone demand, chips shortage and fierce competition in domestic and overseas markets in 2H21
- Expect near-term share price pressure
What’s New
– AAC Tech (2018 HK) announced a profit warning yesterday after market close.
– The company expects 4Q21 profit to decrease by c. 71% to 79% y-o-y due to a lower overall gross margin of the Group, which was adversely affected by fierce competition in domestic and overseas markets.
– FY21 Revenue is expected to increase slightly, but unaudited profit is expected to decline by c.12% to 16% y-o-y, missing market consensus by 25% to 28%, primarily attributable to the lack of a similar exceptional exchange gain reported in FY20 and a reduction in government subsidies in FY21 besides the aforesaid adverse factors.
– The Group observed a weaker profit margin in Q421 due to lower average selling price and lower production efficiency.
Our View:
– The unaudited profit missed our FY21 forecast and market consensus by 26%-29% and 25%-28%. The unsatisfactory performance in profit is owing to the sluggish growth of global smartphone shipment, the prolonged supply chain woe due to the pandemic and fierce competition in domestic and overseas markets
– The weaker smartphone demand especially in android models in 2H21 and chips shortage resulting in delays and cancellation of domestic customer’s smartphone shipment impacted shipment volume of the camera module, acoustic parts and other components.
– The impact from the lack of exceptional exchange gain and a reduction in government subsidies is temporary.
– The global smartphone shipment growth is expected to resume to a normal level in 2022 as handset chips shortage is likely to be resolved in 2H22, which will exert a pull on the handset’s components demand.
– Near-term share price pressure is expected as FY21 profit falls behind the market consensus.
– We maintain a BUY rating with TP at HK$39.8 based on its cheap valuation, delightful growth expectation in the optics and MEMS segment in the mid-to-long term.