[ET Net News Agency, 17 November 2020] HSBC Global Research cut its target price for
AAC Technologies (02018) to HK$64.2 from HK$65.2 and maintained its "buy" rating.
The research house said AAC's 3Q net profit of RMB430m was generally in line with HSBC's
expectations. The earnings drop was mainly due to a 10% revenue slide and 6ppt gross
margin decline as a result of the delay in the new iPhone launch and pricing pressure from
Android customers.
AAC indicated that the optics gross margin reached 27.8% in September, and expects it to
continue to improve to over 30% in 4Q and is on track to exceed 40% in 2021.
HSBC expects the product mix optimization to resume along with the launch of wafer-level
glass (WLG) in 1H 2021, as AAC has locked in design wins of WLG projects, with 48MP 1G5P
as the initial product and 108MP 1G6P in the pipeline.
HSBC lowered its net profit estimates by 14%/16%/15% in 2020/21/22 mainly to reflect its
lower gross margin assumptions in acoustic and electromagnetic divisions. It believes 2020
will be the earnings trough for AAC and forecast a 56% net profit CAGR in 2020-22. (KL)