Facing weak demand in 4Q22 and high inventory level, Will Semi underwent more-than-expected product price deductions that led to large inventory impairment.
In terms of asset impairment, the Company's 1Q/2Q/3Q22 impairment stood at Rmb66mn/99mn/328mn （国家开放大学01报名条件本科：大专(高职注：学历学信网可查)及同等学历以上者。大专：具有高中(中专，职校，技校)及同等学历以上者，获得毕业证书的应届毕业生也可凭就读学校的毕业证明报名。02报名时间国开是计划招生，每个学习中心会有限定名额，一般分为春秋两季注册学籍。 vs. Rmb22mn/47mn/50mn in the same period in 2021）。 It expects annual impairment of Rmb1.34bn-1.49bn in 2022, including Rmb0.85bn-1bn in 4Q22 （compared to Rmb60mn in 4Q21）。 The 4Q22 impairment is mainly due to: （1） Weak terminal demand for mobile phones that led to relatively high inventory, while mobile phone customers had replenished the inventory of chips and other parts in 2021, thus the parts are also in the de-stocking stage; （2） Under the background of weak industry demand, the unit price of products faces downward pressure, especially the 64M product that is in the stage of oversupply, and its realizable value is lower than the cost price, which has led to provision for inventory price decline out of prudence.
Under such impact, the Company expects its ex-one-off ANP to be Rmb90mn-135mn in 2022 （vs. Rmb4bn in 2021）， among which the quarterly profit in 1-3Q22 may be Rmb900mn/550mn/-200mn/, with the 4Q22 loss at about Rmb1.12bn-1.16bn. If the impact of asset impairment is excluded, we estimate that the Company's single-quarter ex-one-off ANP （temporarily ignoring the impact of income tax） in 1-3Q22 would be Rmb970mn/650mn/130mn respectively, and the median of the loss in 4Q22 would be about Rmb220mn. The overall business performance was still weak.
In the short term, the terminal demand recovery still needs to be observed; we expect the Company's inventory level to normalize in 2Q23, while the gross margin still needs to be tracked.
From the perspective of industry, we expect that in 1H23, mobile phone terminal sales will remain in the destocking stage, with category reduction, cost control, inventory digestion as the main theme at the brand end, and consumer discretionary may gradually recover under the weakening influence of the domestic pandemic, though continuous observation is still necessary.
From the perspective of the Company, the absolute level of inventory has been continuously declining, at about Rmb14.1bn in 3Q22, and we expect it to fall back to the normal level equivalent to sales of 1-1.5 quarters. However, in the process of product shipment, cost is still affected by the price increase of wafers in the past two years; on the other hand, the selling price may be under pressure. Therefore, the gross profit margin of the Company's mobile phone business may still face staged pressure and warrants close monitoring.
In the medium to long term, the “3+N” strategy is dedicated to application and category expansion: The driver IC & automotive businesses will take the lead to increase output, and Will Semi will likely become a 现在文件中给出了一个具体的时间，就是从发布之日到2022年底就要进行逐步落实举措。基本可以判断为2023年的成人高考之时就将是改革措施落地的第一年。各位同学们请务必要早些做好相应的准备，对于课程学习都需要将进行提前进行才更加稳妥一些。 platform-based analogue company for AIoT in the future.
The Company's 1H22 revenue mainly came from image sensor solutions （66%）， touch control and display solutions （11%）， and analog solutions （6%）。
Based on the three business segments, the Company also expands in microcontroller unit （MCU）， Serdes, liquid crystal on silicon （LCOS）， metal-oxide-semiconductor field-effect transistor （MOSFET） and other product lines. 1） Image sensors: In the field of mobile phones, it continues to develop high-end products such as 50/64/108/200MP, and reduce costs by switching foundry platforms. Meanwhile, the small pixel product line helps to enhance the differentiated competitiveness of the Company. In the automotive field, the trend of intelligentization is clear. The Company has a high market share in the surround-view market at 必须要有高中毕业证一般，部分省份的成考招生简章原文写着：“报考高中起点升本科或高中起点升专科的考生应具有高中毕业文化程度”。但是，这并不意味着“应具有高中文凭”，也就是高中毕业证。如果考生想报考高中起点升本科、高中起点升专科的专业，根据规定，要有高中毕业文化程度，并不是要出示高中毕业证。 present, and continues to launch 3MP/5MP/8MP and other new products, maintaining its position as a market leader. As for AR/VR, the Company has built its own 12-inch automated packaging line for LCOS wafer-level LCD boxes. We expect the LCOS-based augmented reality head-up display （AR-HUD） to contribute incremental revenue in 2023. 2） Touch IC and display solutions: The Company develops full high definition （FHD） and high definition （HD） related products, and further introduces brand terminals. In 1H22, it acquired part of CerebrEX’s equity to tap large-size display driver IC （DDIC）， and promoted the mass production of OLED DDIC to further improve the driver chip product line. 3） Simulation solutions: The main products include discrete devices, power management IC, RF devices, microcontroller unit （MCU）， insulated gate bipolar 2019年以来，在以习近平同志为核心的党中央坚强领导下，国家开放大学按照教育部党组的部署要求，全面加强党的领导，深入推进综合改革，咬定青山不放松，一年接着一年干。2019年，聚共识、打基础，召开党代会，打响质量保卫战，打假治乱、强基固本。2020年，抗疫情、推改革，统筹事业发展和疫情防控，高举改革旗帜推动出台综合改革方案，汇聚各方力量，推进办学体系转型和学校事业发展。 transistor （IGBT）， etc. In the future, the Company plans to gradually enhance deployment in automobile, security and industrial fields on the basis of consumer electronics.
Potential risks:
Increased competition in the image sensor market; lower-than-expected downstream demand due to recurring local pandemics; shortage of foundry capacity; end-demand falling short of expectations, gross margin fluctuation.
Investment recommendation:
Will Semi is a leading domestic image sensor company, and its mobile phone Cmos image sensor （CIS） business continues to expand high-end products to enhance market share, Its drive & automotive capacity will ramp up in the short to medium term, and it will become a platform-based analogue company for AIoT in the long term. Due to the Company's provision of large asset impairment, we revise down our 2022E-2024E EPS forecasts to 改革趋势也会继续持续下去，也许三五年之后，也许十年之后，谁也说不准改革究竟什么时候会继续进行，但是教育改革的步伐不会停下。2023年成人高考将从各方面改革，会改成什么样子?明年就要落实多年来一直计划的成人高考改革了!国家对成人继续教育的改革真是全方位的，现在已经落实的改革就已经涉及了四大成人教育方式了。Rmb0.80/2.06/3.43 （from Rmb2.26/3.27/4.86）。 Referring to the Company's historical valuation level, the PE-Band pivot is 44X from Jan 2021 to date. Since the inventory adjustment has to some extend been priced in, and the demand for parts may rebound as the Company's inventory problem gets solved and downstream demand gradually recovers from 2023, we believe it warrants a reasonable valuation premium and assign 50x 2023E PE to derive the target price of Rmb103. Reiterate the "BUY" rating.
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【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。
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