WINGTECH(600745)：RESILIENT 1Q SEMICONDUCTOR SALES; NONPROFITABLE ODM BUSINESS TO BE DECONSOLIDATED

机构：招银国际
研究员：Lily YANG/Kevin ZHANG/Jiahao Jiang

Wingtech released its 1Q25 earnings. Revenue declined by 19.4% YoY to RMB13.1bn, while net profit surged by 82.3% YoY to RMB261mn. GPM recovered to 14.0% (vs. 9.1%/9.2% in 4Q24/1Q24). By segment, ODM/ semi accounted for 72%/28% of 1Q sales. The company has entered a transformation phase following the divestment of its ODM business. With a focus now solely on the semi segment, we expect it will be the core growth driver, benefitted by 1) strong growth in AI servers, 2) recovering demand from consumer and industrial markets, 3) growing penetration of EVs and increasing dollar content per NEV (US$20-US$30 per ICE vehicle vs. up to US$100 per EV), and 4) emerging demand drivers such as humanoid robotics. Maintain BUY with TP unchanged at RMB52.
Semi segment delivered resilient growth, with revenue up 8.4% YoY to RMB3.7bn in 1Q25, benefitted by volume surge (1Q shipment reached three-year high). Mgmt. said the company’s capacity was close to full utilization. By geography, China (47% of FY24 segment revenue) outperformed at 24% YoY in 1Q25 with increasing demand from multiple markets, such as recoveries in industrial, consumer, auto markets and strong growth in AI DC and server demand. The company continues to expand its analog IC portfolio, targeting the commercialization of more than 200 new SKUs in 2025. We expect Wingtech’s semi sales to reach RMB16.3bn (up 11% YoY) in 2025, with GPM remaining stable at 38.5%. We forecast its semi segment’s NP to be RMB2.6bn in 2025, implying 16% NPM (vs. 15.9%/15.6% in 2023/24).
ODM business to be deconsolidated post spin-off. The ODM segment recorded a revenue of RMB9.4bn (down 24% YoY) with a GPM of 4.3%, and incurred a net loss of RMB164mn (excluding RMB110mn CD-related expenses). Mgmt. mentioned that the ODM-related assets have been transferred in Jan 2025. Losses related to Android ODM business in 1Q would be borne by Luxshare (report). Post spin-off, the non-profitable legacy business will have no impact on the company’s financials.
Maintain BUY with unchanged TP at RMB52. Following the completion of the divestiture, we expect the market to re-rate the company on a pure-play semi basis. We have revised down our forecast on revenue, as we excluded ODM segment from our calculations. NP is less affected, however, given that ODM business is close to breakeven (even though still not profitable). We cut FY25E NP forecast by 7% on a more conservative lower margin of the semi segment. Our TP is based on 26.5x FY25E P/E, close to its peers’ average and higher than prev. 25x on better sentiment as Wingtech is phasing out its low margin business. Potential risks include: heightened US-China trade relations, unfavourable exchange rates, and weaker-than- expected overseas auto inventory correction.