To The Moon

CMB International has released a research report reiterating a "Buy" rating on Q TECH (01478) with a target price of HK$13.18. This valuation is based on a rolled-forward price-to-earnings (P/E) ratio of 17 times for FY26E, adjusted down from the previous 19.5 times FY25E P/E, primarily reflecting headwinds in the smartphone industry. The stock is currently trading at 13.2 times and 10.5 times FY26/27E P/E, which the firm views as attractive. Near-term catalysts include orders from IoT customers, orders for handheld devices/drones, and the company's FY26E performance guidance. Q TECH issued a positive profit alert for 2025, forecasting a profit increase of 400-450% year-on-year, surpassing the firm's and market expectations. The primary drivers for this growth are the expansion of non-handset businesses (handheld/automotive/XR), upgrades in camera modules/fingerprint modules (periscopic/OIS/ultrasonic), gains from the disposal of its India business, and a return to profitability for Newmax. The firm has adjusted its forecasts to reflect the positive profit alert for FY25 and the business outlook for FY26E. It anticipates that non-handset businesses will be the main growth driver, with FY26E/27E revenue growing 42%/30% year-on-year (IoT/automotive/XR camera modules increasing by 40%/50%/30% respectively). These segments are expected to account for 40%/47% of Q TECH's FY26/27E revenue, driven by demand for drones/handheld devices from IoT customers and specifications upgrades.