Positive FY25 profit alert; non-mobile (handheld/auto/XR) growth to continue into 2026

PositiveFY25profit alert;non-mobile (handheld/auto/XR)growthto continueinto 2026 Target PriceHK$13.18(Previous TPHK$14.50)Up/Downside28.9%Current PriceHK$10.22 Q-Techannounced positive profit alert withearningsgrowth of 400-450% YoY,aboveour/marketexpectations,mainlydrivenbynon-mobilegrowth(handheld/auto/XR),CCM/FPM upgrade(periscope/OIS/ultrasonic),India bizdisposalgainsand Newmax’searnings turnaround. We adjusted our estimates toreflect FY25preannouncement,non-mobile momentum on IoT/drone/handheld/auto/AI glasses, despite smartphone weakness on memory cost hike.We expectnon-mobilebiztobecomethemajor growth driver with48%revenueCAGRinFY25-27E, accounting for 40%/47% of revenue in FY26/27E(vs. 28% in FY25E).Tradingat 13.2x/10.5x FY26/27E P/E, we think the stock is attractive. Reiterate BUYwithnew TP of HK$13.18 based onrollover17x FY26E P/E. Upcoming catalysts includeIoTclient wins, handheld/drone orders,and FY26E guidance. China Technology Alex NG(852) 39000881alexng@cmbi.com.hk Hanqing LIlihanqing@cmbi.com.hk PositiveFY25profit alertabove our/marketexpectation.Q-Techannouncedpositive FY25 profit alertwithNPgrowth of 400-450% YoY,driven by: 1) non-mobile(IoT/auto/XR) CCMshipment growth of 110%YoY on rapiddemandandleading customers’orders(IoT client as 2ndlargest client in 1H25); 2) GPMimprovement driven by mid-to-high-endmobileCCM (periscope & OIS) andFPM (ultrasonic)upgrade, better productmix and operatingefficiency; 3)one-offgain from 51.08% equity disposal ofQ-TechIndia and Newmax’s turnaroundwith profit ofRMB103mn ( vs RMB37mn loss in FY24).We estimaterevenue/netprofit to grow 28%/419%YoY in FY25E. Stock Data 2026 outlook:non-mobile (handheld/auto/XR) CCM to becomekeygrowthdriveramidsmartphoneindustryheadwinds.Looking into 2026, weexpect:1)non-mobileCCM(IoT/auto/XR):42%/30% YoY revenue growth in FY26E(IoT/auto/XR CCM +40%/50%/30% YoY),accounting for 40%/47% ofQ-Tech’sFY26/27E revenue, driven by IoT client’s drone/handheld demand and specupgrade;2) smartphoneCCM:16%YoYrevenue decline (shipment/ASPdown7%/10%) given industry headwinds on memory price hike;3) FPM:5%revenuedecline given weak smartphone shipment. Inthe long term,leveragingQ-Tech’svertical integrationcapability and strongglobalclient base,we are encouragedbyitsnon-mobilebusiness growth momentum, capturing industry opportunitiesindrones/handheld-cam/XR/AI glasses/robotics. Maintain BUY with new TP ofHK$13.18.Overall, we are positive on Q-Tech’sbetter smartphone CCM product mix andmultiple growth drivers innon-mobileCCM segments.We adjusted our estimates to reflectthepositiveFY25profitalertand business outlookin FY26E. Our new TP ofHK$13.18is based onrollover 17xFY26E P/E(vs. prior 19.5x FY25E P/E) on smartphone industryheadwinds.Q-Tech will announce full year results inmid-March and we lookformgmt.guidance on high-end SP CCM mix, non-smartphone CCM including IoTand auto shipment/ASP and FPM shipment/GPM. Source: FactSet Earnings Revision EarningsForecasts Valuation Maintain BUY withnewTPofHK$13.18 We adjusted our estimates to reflect FY25 preannouncement, non-mobile momentum onIoT/drone/handheld/auto/AI glasses, despite smartphone weakness on memory cost hike.We expect non-mobile biz to becomeamajor growth driver with 48% revenue CAGR inFY25-27E, accounting for 40%/47% of revenue in FY26/27E (vs. 28% in FY25E). Our new TP of HK$13.18 is based on rollover 17x FY26E P/E (vs. prior 19.5x FY25E P/E)on smartphone industry headwinds.Trading at 13.2x/10.5x FY26/27E P/E, we think thestockis attractive.Reiterate BUY.Upcoming catalysts include IoT client wins,handheld/drone orders, and FY26E guidance. Source: Company data, CMBIGM Source: Company data, CMBIGM Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered inthis report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressedby that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) coveredin this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any ofthe HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report.CMBIGM or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months. CMBIGM Ratings : St