Will Semiconductor Co.Ltd.Shanghai(603501) (603501)
Conclusions and recommendations:
China’s mobile phone shipment data has been growing for two consecutive months, and the mobile phone market has a recovery momentum. At the same time, based on the optimistic sales target of China’s first-line mobile phone manufacturers in 2022, it is expected that the subsequent mobile phone CIS demand will continue to increase. In addition, the company’s R & D and manufacturing progress in mobile phone CIS continues to accelerate, and is expected to continue to expand its mid-range and high-end market share. In terms of on-board, with the promotion of the demand for automotive intelligence, on-board CIS will maintain rapid growth, and the company will directly benefit as a global CIS leader. Optimistic about the long-term development of the company’s business, we raised the profit forecast for 2022 by 8%. It is expected that the net profit in 2021 and 2022 will be 4.6 billion yuan and 6 billion yuan respectively, yoy will increase by 69% and 30%, corresponding to EPS of 5.22 yuan and 6.81 yuan respectively, and corresponding to the current PE valuation of 56 times and 43 times respectively. Considering the scarcity of the company’s business and the huge domestic substitution space, we maintain the “buy” rating.
The mobile phone market is showing signs of recovery, and the demand for on-board CIS is strong: in November 2021, the shipment of mobile phones in the Chinese market was 35.252 million, a year-on-year increase of 19.2%. China’s mobile phone shipments have increased significantly for two consecutive months, and the mobile phone market has recovered at the end of the year. Meanwhile, the sales target of China’s first-line manufacturers in 2022 is relatively optimistic, and it is expected that the subsequent mobile phone CIS demand will continue to increase. As China’s CIS leader, 1h21 launched 0.6u products, which are highly competitive in the middle and low-level mobile phone market. In the future, 1.0u products will further increase their share in the middle and high-level market. In terms of on-board CIS, according to the data of the Ministry of industry and information technology, the penetration rate of new cars with intelligent driving level above L2 in China has reached 20%. With the promotion of the process of new car intellectualization, there is room for a significant improvement in the number and performance of single car CIS. Qunxi consulting predicts that the global on-board image sensor market demand will be about 220 million in 2022, with a year-on-year increase of nearly 50%, At the same time, with the further maturity of automatic driving, it is expected to reach 550 million in 2025. As the world’s second vehicle CIS manufacturer, the company will directly benefit from the improvement of industry demand.
3q21’s net profit increased significantly: in the first three quarters of 2021, the company achieved a revenue of 18.3 billion yuan, a year-on-year increase of 31%; The net profit was 3.52 billion yuan, a year-on-year increase of 105%. In the third quarter, the company achieved a revenue of 5.87 billion yuan in a single quarter, a year-on-year decrease of 1%; The net profit was 1.28 billion yuan, a year-on-year increase of 73%. Due to the weak demand of 3q21 mobile phone market under the influence of multiple factors such as core shortage and epidemic situation, the profit growth of the company in that quarter was slightly lower than our estimate. However, in terms of gross profit margin, 3q21 gross profit margin was 35.5%, an increase of 7.6 percentage points over the same period of last year and 1.7 percentage points over 2q21, reflecting the optimization of product structure with high gross profit.
Profit forecast: raise the profit forecast for 2022 by 8%. It is expected that the net profit attributable to the parent company from 2021 to 2022 will be 4.6 billion yuan and 6 billion yuan respectively, yoy will increase by 69% and 30%, corresponding to EPS of 5.22 yuan and 6.81 yuan respectively, and corresponding to the current PE valuation of 56 times and 43 times respectively. Considering the scarcity of the company’s business and the huge domestic substitution space, the “buy” rating will be maintained.
Risk tip: the evolution of mobile phone optics is not as expected, and the covid-19 epidemic has dragged down the release of industry demand.
