OFILM Group (002456.SZ) 3Q25 Analyst Briefing Key Takeaways Company Overview - OFILM Group is a smartphone component maker, founded in 2002 and listed on the Shenzhen Stock Exchange in 2010. It is the largest film-based touch module maker in China, primarily serving Chinese smartphone OEMs [16][17]. Industry Insights - The smartphone industry is expected to see growth in shipments due to easing SoC constraints, improved operating systems, favorable pricing, and ongoing optical upgrades [1][3]. - The automotive sector's profitability has improved significantly, despite flat revenue, indicating a positive trend in this segment [2]. Financial Performance Revenue Breakdown (9M25) - Revenue contributions by industry: - Smartphone: Rmb12 billion - Automotive: Rmb2 billion - New fields: Rmb2 billion - Revenue contributions by application: - CCM: Rmb11.5 billion - Lens: Rmb400 million - Microelectronics: Rmb2 billion - Smart cabin: Rmb1.6 billion - Door lock: Rmb200 million [2]. 2025 and 2026 Financial Estimates - Management estimates 2025 revenue to be between Rmb22 billion and Rmb23 billion, with a target of over 10% growth in 2026 and net profits of Rmb500 million [1][3]. - Specific expectations for 2026 include: - Key customer's smartphone shipments likely to grow, partially offsetting losses. - Automotive business profitability expected to improve further in 4Q25. - Losses in 2025 projected to be controlled within Rmb200 million, with a target of Rmb100 million in 2026. - Touch panel business losses expected to narrow by Rmb100 million in 2026. - Revenue from drone clients anticipated to grow by over 10% with improving margins [3][4]. Earnings Summary - 2023A: Net Profit Rmb77 million, Diluted EPS Rmb0.024 - 2024A: Net Profit Rmb58 million, Diluted EPS Rmb0.018 - 2025E: Net Profit Rmb-14 million, Diluted EPS Rmb-0.004 - 2026E: Net Profit Rmb342 million, Diluted EPS Rmb0.102 - 2027E: Net Profit Rmb638 million, Diluted EPS Rmb0.190 [5]. Valuation and Investment Strategy - The target price for OFILM is set at Rmb9.6, based on a 7.4x P/B ratio, reflecting concerns over stretched valuation compared to profitability [4][18]. - The investment strategy maintains a Sell/High Risk rating due to the perceived overvaluation and potential share loss at Huawei flagship smartphones, along with slower camera upgrades in Honor/Xiaomi products [4][17]. Risks and Considerations - High risk is assigned based on stock price volatility over the past 12 months. - Upside risks include higher-than-expected penetration of triple-camera modules and fingerprint sensors, as well as better-than-expected margins due to improved scale [19]. Conclusion - OFILM Group is navigating a challenging landscape with efforts to control losses and improve profitability across its segments. The outlook for 2026 appears cautiously optimistic, but the valuation remains a concern for investors.