Technology

Report by AceCamp International

3Q23 guidance misses expectations due to intensified pricing competition in smartphone OLED driver IC and AceCamp’s industry surveys reveal Chinese peers could gain additional market share as a result of accelerated localisation of smartphone components. Compounding matters, Samsung will also soon begin selling its OLED driver IC to Chinese smartphone makers. AceCamp believes Novatek could have only 15-20% unit market share in Apple’s OLED driver IC orders in 2024 (vs. consensus estimates of 30-40%). Their 2024/25 EPS forecasts are 30-40% below consensus; valuing the stock at 10-13x 2024/25 PE, implies 40%+ downside.

Technology

Report by AceCamp International

The Street is overly optimistic about the firm’s outlook in 2023/24 due to 1) gross margin and ASP contraction and 2) lower-than-expected gross margin and uncertainty for Apple’s OLED driver IC orders. AceCamp expects structural negatives for the display driver IC sector including 1) intensified pricing competition in large / small-sized display driver IC and 2) 20-30% dollar content decline for ram-less OLED driver IC despite a rising penetration. Their 2023/24 EPS forecasts for Novatek are 25-30% below consensus estimates and they expect 30-40% derating for the stock over the next 12 months.