<Profit warning> – Expect 1H net profit to decline 50%-70% y-o-y to Rmb 285m-171m, in line with market consensus
• 1H22 net profit is expected to decrease 50%-70% y-o-y to Rmb 285m-171m, in line with market consensus.
• Camera module shipment in Jun decreased 21.6% y-o-y due to the continued weak demand in the smartphone
• We expect a neutral market reaction
What’s New
– Q tech announced its profit warning and Jun 22 shipment volume yesterday after market close.
– The management expects the 1H22 net profit to decrease 50%-70% y-o-y to Rmb 285m-171m, largely in line with market consensus.
– The decline in profit was due to 1)weak smartphone shipment caused by inflation concern, pandemic-led lockdown leading to weak consumer sentiment and 2)shrinking margin caused by lower utilization rate in factories during the lockdown.
– Camera module shipment in Jun decreased 21.6% y-o-y while Fingerprint recognition modules decrease 38.4% y-o-y due to the continued weak global demand in smartphones and its customer’s project cycle.
Our View:
– We expect a neutral market reaction
– Its key optics business subsidiary, Kunshan QT China, expects its 1H22 profit to be 68.9% lower on 27 Jun.
– We expect the weak consumer sentiment and global shipment decline to continue in 3Q22 and affect the 2H result. Meanwhile, we expect the impact on logistics from lockdown is temporary.
– We maintained the BUY rating with TP of HK$ 8.9 as we expect the negatives are priced in.