|作者：||Kevin CHEN,Clint SU|
|摘要：||Report title:Hardware Technology - Apple results strong beat; Tech sector outlook positive
Analyst:Kevin CHEN,Clint SU
■ Apple JunQ results a blowout despite COVID-19, helped by rapid demand recovery in May/Jun
■ We expect strong smartphone demand into 3Q20; Tech Hardware sector outlook more favorable
■ Top-pick AAC Tech (2018 HK) on product cycle and Optic progress
Apple results strong beat; quick demand recovery
Apple (AAPL US) reported blowout earnings for JunQ well above market expectations. Despite COVID-19, revenue rose 11% yoy to USD59.7bn (14% beat) with growth across regions and segments. iPhone revenue rose 2% yoy (24% beat) with 11% shipment growth (vs.-0.3% in MarQ), helped by iPhone SE launch and demand recovery. Revenue grew strongly for iPad (+31% yoy) and Mac (+22% yoy), helped by increased work-from-home demand. Net profit beat consensus by 25%, came in at USD11.3bn (+12% yoy). Management did not provide SepQ guidance due to ongoing COVID-19 uncertainties. New iPhone launch will be a few weeks later than previous years (typically late-September).
Earnings season positive for Tech; 3Q20 demand strong
Apple’s stellar results support our view of a rapid smartphone demand recovery in 2Q20. The company originally expected performance to worsen yoy in April, but saw quick recovery in May and June. The iPhone delay is well expected and largely priced-in. We expect strong smartphone demand in 3Q20 from Android brands, driven by 1) inventory restocking, 2) new 5G model refresh ahead of the 5G iPhone launch. 3Q20 earnings season has been positive for Tech Hardware sector. We expect the market sentiment to continue near-term, but watch signs of earnings peak-out that could lead to investor profit-taking into market strength.
Implication to our coverage stocks
AAC Tech (2018 HK, BUY) – AAC Tech is our current top-pick given our preference of Apple supply chain over Android. We expect AAC earnings to improve after
bottoming in 1Q20, and its shares re-rating to continue on the 2H product refresh cycle and relative value vs. A-share Tech stocks. The company continues to make progress in Optics, with increasing penetration into the high-end segment with 6P lens that could begin impacting market incumbents. More meaningful WLG adoption next year may provide a competitive edge and growth opportunity for AAC.
Sunny Optical (2382 HK, BUY) – We maintain our positive view for Sunny Optical given strong demand recovery from various Android customers, mitigating the impact of Huawei order disruption. Despite ongoing price pressure, we believe Sunny will maintain solid profitability thanks to its improved automation. Smartphone recovery, potential Apple supply chain entry will be positive share catalysts. We continue to monitor handset specs trend and the growing industry competition.