Starway predicts 2024H1's median revenue of about 2.45 billion yuan, YoY +128%; the median net profit after deducting non-return to mother is about 0.148 billion yuan, turning a year-on-year loss into a profit. The company's high-end mobile phone CIS ushered in a period of explosion, and the low-end mobile phone CIS filled SK Hynix's absence in the market. The security business is also recovering in stages. Maintain a buy rating.
Key points to support ratings
The 2024H1 earnings forecast exceeded market expectations. Starway predicts 2024H1 revenue of about 24.00 to 2.5 billion yuan, median value of about 2.45 billion yuan, YoY +128%; net profit after deducting non-return to mother is about 1.38 to 0.158 billion yuan, with a median value of about 0.148 billion yuan, turning a year-on-year loss into a profit. If the impact of share payments is added back, the net profit of Starway 2024H1 after deducting non-return to mother will reach 2.01-0.221 billion yuan. Based on the median value, Starway's 2024Q2 revenue was about 1.613 billion yuan, QoQ +93%, YoY +161%; net profit after deducting non-return to mother was about 0.128 billion yuan, QoQ +552%, turning a year-on-year loss into a profit.
High-end mobile phones, CIS, have accumulated a lot of money. According to Starway's official Weiwei and TechWeb data, since launching high-end mobile CIS products in 2022, Starway has successively released SC550XS, SC520XS, SC580XS, and SC5000CS products. The SC580XS and SC550XS target the high-end smartphone camera market, and continue to break through on domestic alternative tracks against the Sony IMX803 and IMX766, respectively. The SC520XS targets high-end smartphone wide-angle and telephoto markets to form a product portfolio with the main camera. SC5000CS focuses on a cost-effective market-rich product matrix. Cooperation between 2024H1 STW 50M CIS and customers continues to deepen, further increasing its market share.
The CIS is filling the missing market for mid-range and low-end mobile phones. On January 16, 2024, Korean media ET News reported that SK Hynix is reducing CIS production and focusing on the HBM business due to Samsung orders falling short of expectations and CIS technical competitiveness falling behind rivals. According to Omida data, SK Hynix's share of the global CIS market in 2022 was about 5.3%.
Considering that SK Hynix mainly focuses on the low pixel field of 13M and below, we believe that it may sell its share in the CIS field of low- to mid-range phones such as 2/5/8/13M, and that the gaps will be filled by Chinese manufacturers such as Gekewei and Starway.
Stevie is expected to further expand its influence in the middle and lower CIS markets.
The security business is recovering in stages. As demand in the security market picks up, the performance and competitiveness of new Starway Security products have once again improved, and security sales have also increased significantly.
valuations
Considering that Stalway's 2024Q2 revenue showed rapid year-on-month growth, we believe that the company showed strong market competitiveness, whether it was a high-end mobile phone CIS or a low-end mobile phone CIS. In response, we have drastically raised our revenue expectations for the company's smartphone CIS business. As the scale effect gradually became apparent, we also raised our profit forecast at the same time.
Steway's 2024/2025/2026 EPS is expected to be 1.15/2.02/3.01 yuan, respectively.
As of the close of July 16, 2024, the total market value of Starway was about 22.7 billion yuan, corresponding to 2024/2025/2026 PE 49.2/28.0/18.9 times, respectively. Maintain a buy rating.
The main risks faced by ratings
Demand for phones fell short of expectations. The progress of the CIS iteration for higher-end phones fell short of expectations. The automobile price war spread to the CIS.
Security recovery has fallen short of expectations. The competitive landscape in the market deteriorated.