Core Viewpoint - Q-Tech reported strong 1H25 results, benefiting from a robust upgrade trend in Android smartphone specifications and gaining market share in the FPM segment through a partnership with Goodix, leading to a record high GPM and significant net profit growth [1][2]. Financial Performance - Revenue for 1H25 reached RMB8.8 billion, marking a 15% year-over-year increase and a 4% quarter-over-quarter rise, driven by a 60% YoY increase in FPM shipments and a 31% YoY increase in average selling price (ASP) [2]. - Gross profit margin (GPM) improved to 7.4%, a 0.5 percentage point increase quarter-over-quarter, attributed to a better product mix and utilization [2]. - Operating profit surged 1,269% YoY to RMB280 million, primarily due to effective R&D cost control [2]. - Net income rose 168% YoY to RMB308 million, aligning with the profit alert [2]. Product and Market Dynamics - In 1H25, 32MP+ CCM accounted for 53% of shipments, with a notable increase in OIS and periscope shipments, the latter soaring 590% YoY [3]. - The average ASP of CCM increased by 27% YoY and 16% HoH to RMB41.5, exceeding estimates [3]. - Q-Tech revised its full-year shipment guidance for FPM from +20% YoY to +30% YoY, indicating strong demand for its ultrasonic FPM [3]. - The company raised its full-year non-smartphone CCM shipment guidance from at least 40% YoY to 60% YoY, driven by strategic gains in automotive, drones, XR, and LiDAR sectors [3]. Strategic Developments - Q-Tech became the largest shareholder in poLight, a Norwegian company, which is expected to enhance its XR capabilities with valuable technologies for next-generation XR products [4]. - The company established partnerships with seven leading tier-one automotive suppliers and obtained certifications from 37 global automotive OEMs in 1H25 [3]. Valuation and Target Price - The target price for Q-Tech has been raised from HK$11.6 to HK$16.4, based on a 22x 2026E EPS valuation [1][5].