The company is the core supplier of Apple camera modules. Gaowei Electronics is an important part of Lixun's optical camera module business (Lijing Innovation's shareholding ratio is over 70%). It mainly provides iPhone and iPad camera modules to Apple. In recent years, the camera module business has maintained a revenue share of over 99%, and revenue from Apple, a major customer, has accounted for more than 90% of revenue. Against the backdrop of weak consumer demand in 2022, the company's revenue/net profit both bucked the trend, with year-on-year growth rates of +39.7%/+69.3% respectively.
Basic business: The core supplier of iPhone and iPad camera modules is expected to follow the steady growth of customer A.
In recent years, the trend of multiple cameras+pixel improvements has led to steady growth in the mobile phone camera module market, but due to low technical barriers and many market participants, the camera module industry is relatively competitive. Compared with Android, the company is deeply tied to major customers, and the Apple card is high-end, and the business is relatively stable, which has certain advantages. Looking forward to the future, we believe that the company is expected to continue to gain product shares from major customers through the scarcity of FC packaging production lines, continuous capital investment to upgrade supporting equipment, and lean manufacturing capabilities. Furthermore, considering that Apple usually adopts a decentralized strategy for component suppliers and has had a good cooperative relationship with the company in the iPhone front camera module field for many years, we believe that the company has the potential to enter the iPhone rear camera module supply chain.
Horizontal expansion: Entering the lidar market and collaborating with Sagiteng to determine orders. As the sensor with the best comprehensive performance of the intelligent driving sensing layer, lidar is an important hardware foundation for implementing L3+ level ADAS. According to Yole's forecast, the passenger vehicle lidar market is expected to grow rapidly, with the industry market size CAGR reaching 69% in 2022-28. The company and industry leader Suteng Juchuang established a joint venture, Liteng Innovation (the company holds 51% of the company's shares). In 2022, it has already produced lidar modules and samples, and achieved a horizontal breakthrough in product categories. In the future, the company is expected to use the advantages of intelligent automation and lean manufacturing to expand the range of lidar products and enter the OEM business.
Vertical expansion: Optimistic about the potential of AR/VR card slots, MR volume is expected to drive performance growth. XR is expected to become the next generation of Internet smart terminals. According to Wellsenn XR data, the 2022-25 AR/VR shipment CAGR is 92.6%/52.5%, respectively, and industry growth can be expected. The company deployed VR/AR in 2021, continued to advance strategic cooperation with upstream Sudavig, and established a joint venture in September 2021 (the company holds 40% of shares) to strengthen optical technology reserves such as optical waveguides. As the main supplier of Apple camera modules, the company is expected to leverage its advantages in optical device precision packaging technology accumulated over many years, expand the camera module business to Apple MR products, and deepen partnerships with major customers vertically.
Profit forecasting, valuation and ratings: The company is deeply tied to Apple, and its business performance is more stable than that of Android supply chain companies; horizontal entry into the lidar module business and order growth can be expected; vertically, it is expected to deepen partnerships with major customers through Apple's MR product camera modules, with long-term growth momentum. The company's revenue for 2023-25 is expected to be 10.4/16.0/28.02 billion US dollars, corresponding year-on-year growth rates of -6.9%/+54.4%/+75.8%, respectively, net profit of 0.53/0.97/197 million US dollars, year-on-year growth rates of -37.4%/83.7%/103.0%, and corresponding EPS of 0.06/0.11/0.22 US dollars, respectively. Currently, the company's 24-year forecast PE is 25 times lower than the average of comparable companies, covering it for the first time, giving the company a “buy” rating.
Risk warning: single customer structure, global mobile phone shipments falling short of expectations, technology upgrades falling short of expectations, etc.