Investment Rating - The report upgrades AAC Tech to a BUY rating with a target price of HK$37.8, based on a sum-of-the-parts (SOTP) valuation reflecting a 19.6x FY25E P/E multiple [2][10]. Core Insights - AAC Tech is expected to benefit from a new upgrade cycle in acoustics, optics, and haptics, alongside an upcoming AI smartphone cycle, which will drive earnings growth into FY25/26E. The company reported a 22% revenue growth and a 257% net profit growth year-over-year in 1H24, surpassing market expectations [2][5]. - Management has reiterated a 15% year-over-year sales growth target for FY24E (excluding PSS), with gross profit margin (GPM) expansion anticipated due to several factors including better average selling prices (ASP) and product mix improvements [2][6]. Financial Performance - In 1H24, AAC Tech achieved revenue of RMB 11,247 million, a 22% increase year-over-year, and gross profit of RMB 2,418 million, reflecting an 86% increase year-over-year. The adjusted net profit reached RMB 537 million, up 257% year-over-year [5][8]. - The gross margin improved to 21.5% in 1H24, up 7.4 percentage points year-over-year, with management optimistic about further GPM expansion in the second half of 2024 [5][9]. Earnings Outlook - For FY24E, AAC Tech's management expects revenue to reach RMB 26,791 million, representing a 31.2% year-over-year growth, with net profit projected at RMB 1,665 million, a 124.9% increase year-over-year [6][15]. - The report anticipates earnings growth of 125% in FY24E and 24% in FY25E, with EPS estimates revised upward by 23-31% to reflect strong performance in 1H24 and expected margin recovery [2][7]. Valuation Metrics - The new target price of HK$37.8 implies a 19.6x FY25E P/E, with the stock currently trading at 20.2x FY24E and 16.3x FY25E P/E, which is considered attractive [2][10]. - The SOTP valuation assigns different P/E multiples to various business segments, including 20x for acoustics and optics, and 18x for PSS, aligning with industry peers [10][11].
瑞声科技：Riding on new upgrade cycle; Upgrade to BUY