Lijing took charge of the overall situation, mainly providing Apple CCM to help grow performance. On December 17, 2020, Gaowei Electronics was acquired by Lijing 44.87% of its shares for HK$2,196 billion. 23H1 Lijing's shareholding ratio has increased to 72.25%. In March 2021, a number of Lixun executives joined the Rebuilding Board of Directors, and Lixun Vice President Meng Yan led the management team to take charge of the overall situation. Currently, Gao Wei mainly supplies front-camera modules for Apple phones and tablets, and the share of rear cameras is gradually increasing. 23H1 Apple's revenue share has reached 96.5%, deeply tied to major customers.
The scale of the module grew steadily, and Lijing joined hands with Gao Wei to compete in the first tier. In terms of market size, Yole expects the global camera module market to grow from US$35.5 billion in 2022 to US$47 billion in 2028, with a CAGR of 4.8%. In terms of the competitive landscape, Lijing and Gaowei ranked 7th and 11th in the world in terms of market share in 2022. After CR3, the market share of manufacturers was low and close. Lijing's acquisition of Guangbao Technology's CCM division in 2018 entered the Android supply chain, and the acquisition of Gaowei entered the Apple system in 2020. In the future, Gaowei is expected to collaborate with Lijing to seize more share in a fierce competitive environment.
Apple's front camera upgrade benefited Gao Wei, and the front camera parameters closer to the rear camera brought an opportunity to break in. Starting with the iPhone 14 series, the front camera aperture and focus functions have been fully upgraded. Increased module complexity will drive ASP to rise, and the increase in packaging technology requirements will also bring about a reshuffle in the supply pattern. As a core company, Gao Wei may fully benefit from the sharp rise in volume and price. Furthermore, we have seen that the front camera parameters are moving closer to the rear camera. As a front camera supplier, Gao Wei promptly followed the trend of technology upgrades. The share of rear photography gradually increased, adding further impetus to performance growth.
Emerging businesses are beginning to shine, opening up room for long-term growth. 1) Apple MR: Vision Pro is about to go on sale. Gao Wei dominates the camera module package, and the core position lays an important foundation for subsequent release. Furthermore, the company joined hands with Sudavige to take a stake in Suzhou Liwei Optical and Suzhou Zhongwei Lianchuang to continue to improve the VR/AR business layout; 2) Lidar: Jointly with Sagiteng Juchuang Group to take on lidar manufacturing orders. Sagitar's sales volume in 2023 has reached 256,000 units, a sharp increase of 350% over the previous year, and the annual design capacity is expected to grow more than one million units.
Profit forecast and investment advice: We expect the company to achieve operating income of US$1,06/15.0/2.53 billion in 2023/2024/2025, up -5.5%/41.9%/68.7% year on year, and achieve net profit to mother of US$0.5/0.9/170 million, up -40.6%/75.2%/98.7% year on year. The current stock price corresponding to 2023/2024/2025 PE is 38/22/11X respectively. Considering the company's dominant position in Apple's supply chain, the current valuation is already highly attractive, covered for the first time, and given a “highly recommended” rating.
Risk warning: Share growth falls short of expectations; new business expansion falls short of expectations; industry competition intensifies.