Huawei rescues tens of billions of optical giants

In the past three years and the last week, OFILM, whose stock price once fell to the "knee slash" and doubled its stock price in 6 days, tasted the taste of hell to heaven. From being abandoned by the "fruit chain" 3 years ago to soaring again due to the return of Huawei's Mate60 series, the fate of suppliers standing on the shoulders of giants has never been in their own hands.

The recent capital market, as long as anyone can connect with Huawei, will inevitably usher in a round of stock price surge. Especially in the past week, "Huawei concept stocks" have become the hottest fried chicken in the A-share market.

During the National Day holiday, it was stimulated by the continuous shortage of Huawei Mate60 series mobile phones at the channel terminal and the large orders received by the M7 car; In the context of the overall flat performance of the market after the holiday, the attention and hype of funds mainly revolve around the "Huawei concept".

Huawei automobiles, Huawei mobile phone downstream and downstream industry chains, and the hundreds of stocks involved in them have been taken away.

▲ (On October 9 and 10, the A-share concept sector rose ranking.) Source/Flush)

Among them, the strongest performance is OFILM, which has been hovering in the trough for more than three years.

In a mobile phone, there can be thousands of upstream and downstream suppliers involved, and the most expensive components are mainly motherboards (including SoC chips), screens and lens modules.

On September 28, some supply chain personnel revealed to Interface News: In the Mate 60 series, OFILM camera modules are all involved in the supply and account for the vast majority of the share, including rear cameras, front cameras, fingerprint modules, and a single value of 500-600 yuan. "OFILM's factory in Nanchang has recruited thousands of new people in the past six months, and many production lines have been added."

Canalys analyst Zhu Jiahan told the "market boundary": "Now due to the re-establishment of inventories by manufacturers including Huawei, the upstream supply and demand relationship has improved. Like lens module products, many of the previous prices are close to the cost line, and the previously reduced production capacity cannot be restored in the first time, and there are even some structural shortages. ”

According to the industry's general prediction, if the shipment of Huawei Mate 60 series reaches about 20 million units, and the value supply of OFILM stand-alone machine reaches 500 yuan, this will contribute more than 10 billion yuan to its revenue.

After this information was exposed, OFILM gained a limit for 6 consecutive trading days. In the first three trading days after the National Day, OFILM even sealed the price limit board after the opening.

As of Friday, October 13, OFILM has risen to 10.30 yuan per share. Compared with before and after the release of the 2023 half-year report in August this year, the stock price has doubled.

▲ (OFILM's stock price chart in the past three months.) Source/Flush)

01. Huawei order, color geometry

In the past three years and the last week, OFILM has tasted the two heavens of fate, from hell to heaven.

At the end of August, when OFILM announced its 2023 interim financial results, the company still saw no signs of performance improvement. Since being removed from the supply list by "Fruit Chain" in 2020, OFILM has suffered annual report losses for three consecutive years by 2022.

In the latest financial report, OFILM's revenue in the first half of 2023 showed 6.315 billion yuan, down 18.79% year-on-year; Net profit attributable to owners was -354 million yuan, although it was still a loss, but it was significantly narrowed compared with the loss of 874 million yuan in the same period last year.

However, the slowdown in the range of losses did not lead to an improvement in market value.

Before and after the mid-year report was disclosed, OFILM's market value had fallen to about 17 billion yuan. Compared with the market value of more than 70 billion yuan at the highest point, OFILM's market value has shrunk to about a quarter at its lowest ebb.

In the past week, with the sale of Huawei's Mate 60 series and the rise of the east, OFILM will undoubtedly feel raised. So this time, what is the quality of Huawei's orders obtained by OFILM? Will OFILM be able to sweep away the haze from now on?

Recently, in response to the change in OFILM's trend, "Market Boundary" called the OFILM Securities Department for verification. Regarding media reports that the company supplied the Huawei Mate 60 series, OFILM was vague: "We basically have confidentiality agreements with suppliers, and we can't answer the question of whether there is a supply relationship." ”

However, according to the "city boundary", OFILM's factory in Nanchang has been expanding enrollment in recent months. A number of OFILM's recruitment managers confirmed to "City Boundary" that its Nanchang factory is continuing to recruit people, with hourly and regular workers, and the construction period of hourly workers can be signed for about December.

Considering that since the beginning of this year, the overall performance of the mobile phone sales market has been sluggish, OFILM can start horsepower to increase production against the trend at this time, which is likely to be related to the large increase in orders.

According to an industry insider who told "City Boundary", it is not surprising that OFILM has become a Huawei Mate60 supplier. In 2019, when it was kicked out of Apple's supply chain, OFILM revealed that its top three customers that year were Huawei (32%), Apple (20%) and Xiaomi (19%) - Huawei was its largest customer.

Although OFILM did not clearly say whether to supply Huawei, on October 12, OFILM Chairman Cai Rongjun responded to First Finance and Economics: OFILM is "stubbornly alive".

In addition, combined with the recent disclosure from brokerages such as Xueqiu and Alpha Factory, the expert research report from OFILM shows that in the proportion of orders from large customers, Huawei's monthly orders reached 10 million units. OFILM occupies most of the orders of Huawei's Mate 60 series and part of the orders of the P series, and the value share can reach 70%-80% among friends.

According to the above disclosure, starting from June, the shipment of the main camera of the Mate 60 series in the past two months is about 1-2 million units. In terms of lenses, OFILM has deeply participated in the high-end lens project of Huawei's P60-70 series, and the next generation of P70 products has been sent samples to Huawei. In 2024, the new products, OFILM's optical module business is likely to be Huawei's main supply.

In response to stock price changes, OFILM announced on the evening of the 11th to remind investors not to follow speculative thinking, pay attention to risks, and is currently grasping the accounting of the third quarter financial data.

02. The rise and fall of giants in the shadow

Looking back at the past three years, the mobile phone industry chain suppliers represented by OFILM, with the fate of the two giants of Apple and Huawei fluctuating, it can be said that the road is full of difficulties and twists and turns.

"OFILM has really mixed well in the past two years, and the boss has changed several times." An industry insider told City Boundary.

Around 2010, with the accelerated popularization of the smartphone industry, a number of domestic mobile phone supply chain enterprises took advantage of the rise. One of the most famous is the "fruit chain" (apple industry chain).

OFILM was first established in 2001, and due to the company's poor management, the two founding shareholders sold OFILM's equity to Cai Rongjun and Cai Gao's brothers in 2004.

After Cai Rongjun joined OFILM, with the key coating technology of optical filters, he quickly gained a foothold in the infrared cut filter market, and became the world's largest manufacturer in 2006. After solving the survival problem, OFILM continued to raise funds and entered the field of touch systems in 2008.

In 2008, OFILM's annual revenue was only 231 million yuan. After entering the capacitive touch track, OFILM dabbled in the field of camera modules in 2012, and began to focus on fingerprint recognition modules in 2014.

By the end of 2013, OFILM has become the world's largest touch screen manufacturer. However, in the camera and lens module business, OFILM's largest source of revenue, the market was still dominated by two major players, Sunny Optics and Lite-On Group. But at the same time, OFILM began to gradually open this track with its accumulated downstream customers.

In 2014, OFILM's camera module segment ushered in a performance explosion. In the first half of the year, the company's camera module revenue was 1.14 billion yuan, accounting for 13.73% of the overall revenue. In 2015, the production capacity of OFILM cameras exceeded 20 million / month, becoming the world's first.

On this basis, in 2016, OFILM acquired 100% of the shares of Sony South China, which has the industry's top camera module development and packaging technology.

With this acquisition, OFILM acquired the key technology of Sony's camera module, and also knocked on the door of Apple's supply chain, becoming one of Apple's 30 suppliers in China in the same year.

In 2017, in the second year of entering Apple's supply chain, OFILM's revenue from optical and optoelectronic products was immediate, doubling from 7.94 billion yuan to 16.632 billion yuan.

In 2018, OFILM's optical and optoelectronic product revenue has surpassed Sunny Optics, becoming the largest mobile phone camera module enterprise in domestic shipments and revenue.

From 2018 to 2020, with the unlimited prosperity of Apple's mobile phone, the camera module business brought OFILM high revenue of 8.3 billion yuan, 11.7 billion yuan and 14.5 billion yuan per year.

At the same time, OFILM also entered Huawei's supplier list. With two super customers, in 2020, OFILM's revenue exceeded 50 billion yuan, and its market value reached the highest 70 billion yuan.

But the weather is unpredictable. In 2019, after Huawei encountered geopolitical friction, mobile phone shipments plummeted. In July 2020, OFILM was announced by the U.S. Department of Commerce to be included in the Entity Sanctions List.

Although it was not until March of the following year that Apple officially terminated its cooperation with OFILM. But since July 2020, OFILM's stock price has begun to plummet.

In fact, OFILM can now wait for the return of Huawei's Mate 60 series, to some extent, thanks to the timely institutional help. In June 2020, OFILM issued an announcement that it planned to increase 6.758 billion yuan, with the participation of Hefei State-owned Assets Supervision and Administration Commission.

But this capital injection is not enough to save OFILM's decline. According to OFILM's 2022 annual report, the company's revenue has fallen sharply from 51.9 billion yuan at its peak to 14.8 billion yuan, and has recorded a net loss of 5.182 billion yuan.

Since 2022, the departure of many executives of OFILM has also caused great concern in the market. In September 2022, Yang Xiaobo, deputy general manager of OFILM, Bi Ran, securities affairs representative, and Cai Gaojiao, director and deputy general manager, resigned; In March 2023, Zhao Wei, vice chairman and general manager of OFILM, Guan Saixin, director and deputy general manager, and Luo Yonghui, chairman of the supervisory board, resigned.

03. The hidden worry of dependence of large customers is still there

After OFILM was removed from the fruit chain, in addition to the direct negative impact of losing large customers, the market also questioned the company: since 2019, OFILM's top three customers have been Huawei, Apple and Xiaomi; For the over-reliance on a single large customer, and the high dependence of revenue on optical lens modules, OFILM's crisis is an accident, but it is not accidental.

According to financial report data, in 2019, when OFILM was still in the fruit chain list, it made a profit of 510 million yuan that year. However, its largest customer (Huawei) accounted for 31.16% of sales, and its second largest customer (Apple) accounted for 22.51% of sales.

By 2022, OFILM's dependence on large customers will still be difficult to get rid of. According to the financial report, the proportion of sales accounted for by its top five customers was 24.49%, 18.69%, 12.77%, 7.23% and 6.36%, respectively, totaling more than 69%. However, after two years of turmoil, which of the above five major customers belongs to Huawei, the China Times reporter has asked OFILM for confirmation, but has not been confirmed.

According to OFILM's 2023 interim report, as of the first half of this year, smartphone optical components represented by camera modules are still its largest business, including camera modules and lens modules, accounting for more than 70% of revenue.

Therefore, in the past three years, OFILM has been very urgent to open up the second growth curve. In August 2022, Hefei OFILM Intelligent Connected Vehicle Technology Co., Ltd., a subsidiary of OFILM, opened in Hefei Binhu Cloud Valley Science and Technology Park, marking the beginning of OFILM's full development in the intelligent vehicle industry.

The reason for entering the automotive track is mainly based on OFILM's previous technology accumulation in the field of optics.

"We mainly develop advanced sensors for smart cars, cameras and lenses related to assisted driving, millimeter-wave radar, lidar and other products." OFILM Securities Department said to "Market Boundary".

However, so far, the revenue provided by smart car-related businesses is relatively limited. According to OFILM's disclosure to the "city", as of the first half of this year, the revenue of smart car products was 616 million yuan, accounting for only 9.75%.

Under the limited potential of the outbreak of new business, undertaking the performance growth from Huawei is still OFILM's core hope.

Recently, according to a number of media reports, Huawei plans to ship 60 million to 70 million mobile phones in 2024. Relevant sources said that Huawei has added enough orders to the supply chain.

Not long ago, according to Tianfeng International analyst Guo Mingxi, Huawei Mate 60 Pro's shipment plan in the second half of the year has been adjusted to 5.5 million to 6 million units, and the cumulative shipment volume will reach at least 12 million units after 12 months of release.

Canalys analyst Zhu Jiahan also expressed a similar view to the "city": according to the feedback of the supply chain, the shipment of the Mate60 series is expected to exceed 6 million units in 2023, and the whole life cycle is expected to reach 10 million to 15 million units, which ultimately depends on the supply situation and Huawei product planning.

According to media reports: After the sale of the Mate60 series, the components of related suppliers are ushering in a price increase, and the relevant products of the optical fingerprint module suppliers under the screen that supply Huawei Mate60 series products have increased the price by 15%-20%, and some models have increased the price by 30%, and suppliers such as Goodix Technology will benefit.

At present, the media has asked a number of optical module manufacturers that supply Huawei Mate 60 series for verification, and the reply is that "no price increase notice has been received or issued".

However, for whether the hype of OFILM itself has been heated, the market has given it a sufficient premium valuation, and relevant netizens have judged on Xueqiu: assuming that OFILM all participate in Huawei Mate 60 series camera modules, the value of a single unit is calculated at 500 yuan, and 20 million units is 10 billion revenue. Based on a net profit margin of 2%-3%, that is, a profit of 2-300 million, at a 50x valuation, the market value of growth is 10-15 billion.

Based on this calculation, OFILM, which has 6 consecutive boards, may have cashed in this wave of orders from Huawei in advance.

(Author |.) Zeng Guang, ed Li Yuan)