Q~Tech （1478.HK）1H24 earnings recovery on fast track； reiterate BUY

1H24earningsrecoveryonfasttrack;reiterateBUY BUY(Maintain) Target PriceHK$6.43(Previous TPHK$6.47)Up/Downside%885Current PriceHK$4.05 Q-tech announced in-line 1H24 results driven by strong CCM/FPM growth and GPMimprovement on smartohone demand rebound, share gains, an increasing UTR anda better high-end product mix. For 2H24/2025, we remain positive on high-end specpenetration and ultra-sound FPM upgrade in smartphones. We slightly adjust downupgrade to drive ASP/GPM, auto CCM sales growth to accelerate under rising NEVFY24-25E EPS by 1-8% to factor in 1H24 results and 2H seasonality, and our newEPS is 19-24% above consonsus. The stock now trades at 12.4x/8.3x FY24/25EP/E, which is atractive, vs. our estimated 335%/50% YoY EPS growth in FY24/25E.Our new TP of HKS6.43 is based on the same 13x FY25E P/E. Maintain BUY. Alex NG(852) 3900 0881alexng@cmbl.com.hk 1H24 results in-line; strong shipments with improvingsmartphone clients' share gain, UTR hike and better product mix. Q-techGPMdriven by strength across all segments with 30%/100%/17% YoY in smartphoneCCM/auto & loT CCM/FPM shipments. GPM improved 1.8ppts YoY and 0.7pptsQoQ to 5.2%, and mgmt. attributed the increase to: 1) global smartphone markelrebound and share gain in major smartphone brands; 2) higher-margin auto and(32MP+) sales rose to 49.2% in 1H24, in which share of OIS/periscope CCMsales reached 12%/ 0.7% and periscope recorded 100%+ YoY growth, Overall,NP growth of 431% YoY was in-line with prior profit alert on revenue growth andGPM improvement. Hanqing LIlihanqing@cmbi.con.hk 2H24E/2025 outlook: high-end products to boost ASP/GPM; auto CCM toaccelerate; ultra-sound FPM upgrade. Q-Tech also announced that 1)smartphone CCM shipment in July recorded 5.5% YoY and 1.5% MoM growth,suggesting on-going Androld recovery and inventory restocking; 2) FPM CCMin July achieved 58% YoY and 8.3% MoM growth given the smartphonedemand rebound and market share gains. For 2H24E/2025, we are positive ona rising share of high-nd CCM sales to drive better ASP/GPM on high-end specbetter customer demand under the smartphone replacement cycle: As for nonmobile CCM, we expect auto CCM biz will accelerate driven by rising NEVpenetration, increasing dermand for ADAS/surround view/smart cockpit cameramodulcs and domestic/overscas Tier-1 customers project wins. In addition, weremain positive on ultrasound FPM's application upgrade in smartphones. Maintain BUY, We are positive on high-end upgrade to drive ASP/earningsimprovement and auto CCM/ultra-sound FPM to drive overall growth in2H24/2025. We slightly revise down our FY24-25E EPS by 1-8% (but still aboveconsensus by 19-24%) to factor in 1H24 results and 2H seasonality. Our newTP of HK$6.43 is based on the same 13x FY25E P/E.Maintain BUY. Related Reports: 1) Eernings recovery has just bogun;Raise TP to HKS6.47 12 Jul 2024(ink) 2) ASP/GPM upsirte drivcn by Androidrecovery and spec upgrade 27 Jun2024 (link) 3) 1Q24 shipment rebourid on Irack;Auto & loT as next growth drivers 11 4) Jan shipment beat; Focus on high-endsmartphonc recovery in 1H24E 8 Fcb2024 (ink) FocusCharts Source: Company data, CMBIGM estimates Source: Company data, CMBIGM estimates Source: Company data, CMBIGM estimates Source: Compeny data, CMBIGM estimetes Source: Compeny date, CMBIGM estimates Source: Company data, CMBIGM estimates 1H24Review EarningsRevision EarningsFForecasts Valuation Maintain BUY with new TP of HK$6.43 We remain positive on non-handset CCM (including automotive and loT) to drive earningsconsensus by 19-24%) to factor in 1H24 results and 2H seasonality. Our new TP ofHK$6.43 is based on 13x FY25E P/E (unchanged). Trading at 12.4x/8.3x FY24/25E P/Ewe think the stock is attractive, Maintain BUY, Upcoming catalysts include shipmentrecovery, product launches and non-smartphone CCM order wins. Source: Cormpany data, CMBIGM Source: Company dala, CMBIGM Disclosures&Disclaimers Analyst Certification The research analyst who is primary responsibie for the content of this research repcrt, in whole or in part, certifies that with respect to the securities or issuerno part nf his ar har comgensatinn was, is, or will bn, rinectly or indiractiy, ralated to the specific views expressed hy that analyst in this repart. deal in or tradn in the stnck(s) covernd in this resarn ropont 3 business cays attar tne date of issiun of this repart: (3) sarve as an oficer of any af thn HangKong listed companies covered in tnis report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM Ratings Slock with polential rebun of +15%, to -10% over nest 12 monthsStock wth potential return of cver 15% over nsxt 12 montsStock is not rated by CMBIGMStock with potentigl loss of ovar 10% cver exl 12 mcrths HOLDBUYSELLNOTRATED : Industry expected to outperfarm tha reievant troad marke: benchmark over next 12 monthsIndastry ezgected to undecperfam the relevert broed market berichenerk over nex