Shenzhen Goodix Technology Co Ltd_ Better outlook in the price; EW

Summary of Shenzhen Goodix Technology Co Ltd Conference Call Company Overview - Company: Shenzhen Goodix Technology Co Ltd (603160.SS) - Industry: Greater China Technology Semiconductors - Current Price: Rmb75.39 (as of January 9, 2025) - Market Cap: Rmb34,358 million - Price Target: Raised from Rmb62.00 to Rmb81.00 Key Points Industry and Market Dynamics - Smartphone Market Recovery: The smartphone inventory de-stocking has shifted to re-stocking in 2024, indicating a market recovery. Consumption subsidies for smartphones will be extended nationwide in 2025, which is expected to positively impact smartphone OEMs and supply chain companies [2][11]. - Ultrasonic Fingerprint Adoption: The adoption of ultrasonic fingerprint technology is anticipated to increase, particularly with the rise of flexible OLED displays. The price of ultrasonic fingerprint sensors has decreased to US$2-3 from US$10, making it more competitive against optical fingerprint sensors priced around US$1. Expected adoption rates are ~8$1 billion in 2022, projected to grow at an 8% CAGR from 2022 to 2026. Goodix aims to capture market share among Chinese smartphone OEMs due to its high-precision and compact light sensor technology [4][20][21]. - New Product Lines: Goodix has started shipments of NFC+eSE security chips and has made progress with healthcare sensor chips. These developments are expected to contribute to revenue growth [5]. Financial Performance and Projections - Earnings Growth: Goodix is expected to achieve a 17.8% earnings CAGR from 2024E to 2027E. The company’s EPS is projected to rise from Rmb0.36 in 2023 to Rmb1.72 in 2026 [5][31]. - Revenue Estimates: Projected revenues are Rmb4,408 million for 2023, Rmb4,339 million for 2024E, Rmb5,093 million for 2025E, and Rmb6,024 million for 2026E [53]. Valuation and Investment Thesis - Valuation Metrics: The new price target of Rmb81 implies a 2025e P/E of 55.0x, aligning with the company's historical average. The valuation reflects higher earnings estimates driven by ultrasonic fingerprint and light sensor contributions [25][34]. - Investment Risks: Potential risks include slower adoption of ultrasonic fingerprint solutions, geopolitical tensions affecting Huawei smartphone shipments, and aggressive pricing competition in the fingerprint sensor market [30][42]. Conclusion - Outlook: The overall outlook for Shenzhen Goodix Technology Co Ltd is cautiously optimistic, with expectations of recovery in the smartphone market and growth in new product lines. The company is positioned to benefit from technological advancements and market trends, although it faces certain risks that could impact its performance [42][25].