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GoerTek Inc:Virtual Reality brings earnings reality for GoerTek;reiterate Buy

发布时间:2016-04-14    研究机构:高盛高华证券

What's changed

We address three key investor queries on GoerTek: 1) Virtual Reality (VR)ODM gross margin; 2) Apple acoustic revenue growth; 3) competition withAAC. We forecast VR to contribute 22% of revenues in 2016for GoerTek,making it the company with largest VR exposure globally. We reiterate Buyon GoerTek with our unchanged 12-month Rmb30target price offering11% upside potential.

Implications

(1) Above-peers VR ODM GPM: We forecast 20%+ 2016GPM for VRODM, due to its in-house key components supply (35-40% of VR headsetbill of materials), lower manufacturing and labor costs, leading to 5pp,0.5pp and 0.5pp GPM accretion, respectively.

(2) Stable Apple revenue growth: We estimate its Apple revenues togrow by 5% yoy in 2016, driven by a 10% increase in dollar content perbox of acoustic components in the next iPhone and flattish unit sales.

(3) Rational competition with AAC: We see rational competition betweenGoerTek and AAC as the acoustic supplier base for Apple is relativelyconsolidated. However, GoerTek is moving towards ODM and its ‘bigaudio’ OEM models while AAC is focusing on extending technologyleadership in other components. We have not factored in GoerTek’s OEMbusiness because it takes time to build a brand.We view Oculus shipments in 2Q16, as well as the new iPhone launch in2H16, as catalysts for GoerTek shares. Facebook has recently pushed outits Oculus shipments from April to May so we expect GoerTek to shipOculus in April.

Valuation

We fine-tune our forecasts to reflect the 1Q16preannouncement. Wederive our target price by applying 2016E peer average multiple (19X) to2020E earnings and discounting back to 2016E using an 8.4% COE.

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