Earning First Take : 1Q22 profit decreased by c.62% y-o-y, missing the market consensus

  • Revenue increased 14.1% y-o-y, ahead of the market expectation
  • 1Q22 profit fell by 61.5% y-o-y, missing the market consensus by 9%
  • The profit drop was mainly due to the gross margin contraction and the weak smartphone shipment
  • Expected short-term price pressure

What’s New
– AAC Tech (2018 HK) announced the 1Q22 result after the morning trading session.

– Revenue increased 14.1% y-o-y to Rmb 48bn, ahead of the market expectation by 12.7%, primarily attributable to increased contribution from precision mechanics and optics business.

– Gross margin decreased to 19.5%, down 11.6ppts y-o-y, mainly due to changes in product portfolio mix, increase raw material and labor costs

– Net profit fell by 61.5% y-o-y to Rmb205m, missing the market consensus by 9.0%, primarily attributable to the gross margin contraction 

Our View:
– We expected short-term price pressure is expected as the profit missed. 

– The unsatisfactory performance in profit is owing to the gross margin contraction caused by the change in product mix and ASP pressure from overseas customers, and the weak smartphone shipment.

– The impact of weaker smartphone demand especially in android models on CCM’s shipment volume and the sales of high-end components is expected to last in 1H22. 

– We currently rate BUY on the counter with TP at HK$24.7, on a strong growth expectation in the optics and MEMS segment in FY21-24F.