2018 Interim Results& NDR Presentation
The presentation is prepared by “Q Technology (Group) Company Limited” (the “Company”) and is
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operating results or its future business prospects.
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information, whether financial or otherwise, contained in this presentation.
Content
1. 2018 Interim Results Business Review
2. Market Trend Analysis
3. Planning and Outlook of 2H2018
4. Appendix
Camera ModuleSales Volume (Units M)
83.2
1H2017
1H2018
102.9+23.6%
Fingerprint Recognition ModuleSales Volume (Units M)
34.3
1H2017
1H2018
45.3+31.9%
RMB ‘000
1H
YoYChange
2H
HoHChange2018 2017 2017
Sales Volume (units) 148.1KK 117.5KK +26.0% 135.7KK +9.1%
Revenue 3,206,712 3,604,998 -11.0% 4,333,960 -26.0%
Gross profit 39,056 434,428 -91.0% 448,305 -91.3%
Gross profit margin 1.2% 12.1% -10.9pts 10.3% -9.1pts
OPEX ratio 4.6% 5.0% -0.4pts 3.9% +0.7pts
Net profit/ loss -51,288 201,784 -125.4% 234,493 -121.9%
Net profit margin -1.6% 5.6% -7.2pts 5.4% -7.0pts
Basic EPS -4.6 cents 18.4 cents -125.0% 21.4 cents -121.5%
Operating cash flow -278,107 1,226,683 -122.7% 994,830 -128.0%
ROE -2.5% 11.6% -14.1pts 10.9% -13.4pts
4
Start to benefit from the customer mix enhancement and scaled up production. The Company has established solid relationship with top four brands and the contribution from top five customers became more balance
As the cooperation with one big customer in CCM was at preliminary stage, the Group mainly shipping products of low resolution and hinder the progress of product mix improvement
1H 2018 Business Review
Enhancing customer mix and scaling up production for better market positioning
Product specs migration was in transition, awaiting another upgrade cycle
Technology cooperation deepened by vertical
integration
Focus on technology development to improve
competitiveness
For CCM, the procurement of mid-to-low-end dual camera modules switch to “two single module” basis. Also, the 3D sensing modules and triple camera modules take time to be popular
For FPM, the capacitive type FPM has entered into mature stage, the ASP decline is accelerating. Under-glass FPM is just debut on market and is yet to contributed a material profit
Investment in Newmax Technology (3630.TW) begin to show progress, revenue of Newmax has achieved a faster YoY increase since May 2018. Both companies continued to deepen the cooperation in different areas, such as under-glass fingerprint recognition module, 3D structured light module, 3D ToF module and camera module. The Group also helps to improve the marketing of Newmax
Diversified sourcing channels of lens results with cost saving and secured supply
Focus on developing 2nd
generation optical under-glass fingerprint recognition module and 3D structured light module, both new products have successfully obtained key customers’ qualification and will enter into mass production stage in 2H 2018
Focus on developing the abilities in the design and production automation of triple camera module, multiple camera module, periscope camera module, ToF module and automotive camera module 5
Top 5 Customers in order of sales volume: vivo, Xiaomi, Huawei, OPPO, Huaqin
1H2018 Top 5 Customers of Camera Module Business
1H2018 Top 5 Customers of Fingerprint Recognition Module Business
84.4%
15.6%
Top 5 Customers Others
98.6%
1.4%
Top 5 Customers Others
Top 5 Customers in order of sales volume: Huawei, Xiaomi, vivo, OPPO, Huaqin
6
12,403
7,707
10,059
12,259
14,83816,818
15,097 14,541 14,680
20,055
19,855
19,085
15,434
9,124
11,694
15,586 15,418 15,932
17,494
15,031 14,702
15,067
12,92914,038
16,098
10,104
17,567
19,330 20,264
19,485
23,149*
0
5,000
10,000
15,000
20,000
25,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 2017 2018Sales Volume(K)
7
8
1H 2017
<5M27.7%
8M28.9%
>10M36.3%
Dual Camera7.2%
<5M29.8%
8M17.7%
>10M35.9% Dual
Camera16.6%
1H 20182H 2017
<5M46.5%
8M13.8%
>10M28.3%
Dual Camera11.4%
9
24.926.4
30.5
34.536.4 35.7
33.3
38.441.2 41.6
50.2
54.7
50.3
24.226.7 27.7
30.327.5
25.123.5
21.7 22.725.1
30.9
37.3
25.1
0
10
20
30
40
50
60
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H2014 1H2015 2H2015 1H2016 2H 2016 1H 2017 2H 2017 1H 2018
Peer A Q Technology Peer A Q Technology
Sales Volume (K)
Average Selling Price (RMB)
10
3
65 285 336
507198
559 910
1,530
4,544
6,2845,723
5,386
4,649
5,997 6,802
5,541 5,946 5,686
7,012 6,790
7,957
10,811
8,151
9,696
3,761 7,536 7,4547,844
8,9809,639 *
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016 2017 2018SalesVolume(K)
11
Revenue decreased by 11.0% year-on-year (YoY), this was mainly due to the YoY decrease in integrated products average selling price (ASP) for the Period by approx. 29.6% to approx. RMB21.6, mainly attributable to: Intensifying market competition and in order to further optimize customer mix and product mix and
expand sales scale, the Group adopted a periodic aggressive price competitive strategy Product specs upgrading was at a transitional period and the price reduction of legacy products was
relatively high, while new products were yet to launch into the market or only small quantities were sold during the Period, thus posing pressure on the ASP
The cooperation period with one big customer in camera module (CCM) was still at early stage and there was a strategical need to sell lower megapixels products to gain their recognition, and thus it affected the improvement of product mix of CCM products
The proportion of coating fingerprint recognition modules (FPM) with relatively lower price to the sales of FPM products further increased, and the optical under-glass FPM had yet to enter into mass production stage during the Period
1,7273,605 3,207
3,264
4,334
2016 2017 1H2018
Revenue
(RMB M)
12
GP Margin down 10.9 pts to 1.2%, mainly due to: Product mix factor: The specs upgrading of CCM and FPM products were at a transitional stage during the Period and the
progress of product mix optimization, such as the proportion of 10M and above CCM and dual camera modules were below expectation, hence the proportion of products with low GPM went up;
Price competition factor:Under the intensifying market competition, the Group periodically adopted aggressive pricing strategies to establish a long-term customer strategic relationship, expand product sales scale as well as gaining market share;
The production capacity of CCM and FPM of the Group increased substantially YoY. However, affected by various factors such as the cooperation stage with customers, project cycle and periodic shortage of certain major components, the capacity utilization was weaker-than-expected and the decrease in ASP had increased the proportion of overall depreciation cost of products, and the weaker-than-expected capacity utilization also led to other related cost increase;
FX factor: The central parity rate of RMB against USD depreciated by approx. 1.3% during the Period, particularly a sharp significant decrease in May and June during the peak production period of materials preparation, whereby a fairly amount of raw materials of the Group were denominated in USD in purchase and settlement, and sales revenue was mostly settled in RMB, which made the cost of production materials settled in USD increased
Gross Profit and GP Margin
161,365 261,072 434,428 448,305 39,056
9.3% 8.0%12.1%
10.3%
1.2%
1H2016 2H2016 1H2017 2H2017 1H2018
(RMB K)
13
1H 2018 net cash outflow of operating activities amounted to approx. RMB 278 million, mainly due to: Gross profit margin decrease YoY during the Period Days of trade and bills receivables lengthened by 9 days from 111 days to 120 days The impact of cut-off point of interim results
Debt-to-Equity ratio increased from 50.2% of year-end of 2017 to 63.5% of 1H 2018, mainly attributable to theincrease of bank borrowings from year-end of last year for the cash need of daily operation and productioncapacity expansion. The Group recorded a bank borrowing balance of approx. RMB 1.078 billion and billspayable of approx. RMB 770 million, approx. 1.848 billion in total. Bank borrowings by the end of 1H 2018increased to RMB 1.298 billion, but the bills payable reduced to approx. RMB 280 million, equal to approx. RMB1.578 billion in total, which has decreased RMB 270 million
Operating Cash Flow
21.4%
50.2%
63.5%
2016 2017 1H 2018
-61,770
1,226,683
-278,107
1H 2016 1H 2017 1H 2018
(RMB K)
Debt-to-Equity Ratio
14
OPEX ratio was approx. 4.6%, a decrease of 0.4pts from the same period last year, mainly due to: R&D expenditure rate stay at stable level of around 3.1% There was a doubtful debt allowance of approx. 26.913 million, booked in the same
period last year and there is no allowance made during the Period The Group is confident to maintain a reasonable OPEX ratio
OPEX Ratio
3.9%5.0% 4.6%
1H 2016 1H 2017 1H 2018
15
64,905
225,505 223,813
1H 2016 1H 2017 1H 2018
(RMB K)
6.3%
11.6%
-2.5%
-4.0%
1.0%
6.0%
11.0%
16.0%
1H 2016 1H 2017 1H 2018
82,194201,784 -51,288
108,561
234,493
2016 2017 1H2018
4.8%
3.3%
5.6% 5.4%
-1.6%
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
1H2016 2H2016 1H2017 2H2017 1H2018
(RMB K)
Net Profit Net Profit Margin
Cash and Cash Equivalent Return on Equity
Content
1. 2018 Interim Results Business Review
2. Market Trend Analysis
3. Planning and Outlook of 2H2018
4. Appendix
17
Huawei27%
OPPO20%
vivo19%
Xiaomi14%
Others20%
Top 4 = 80%
Huawei21%
OPPO18%
vivo14%
Xiaomi13%
Others34%
Top 4 = 66%
Q2 2017 market share of China smartphone market
Q2 2018 market share of China smartphone market
18
43%
57%
Top 3 Chinese CCM Makers Others
30%
70%
Top 3 Chinese CCM makers Others
1H 2017 aggregated global market share of Top 3 Chinese CCM makers
1H 2018 aggregated global market share of Top 3 Chinese CCM makers
19
0
50
100
150
200
250
2018 2019 2020 2021
Optical UltrasoundUnits (M)
20
0%
20%
40%
60%
80%
100%
2018 2019 2020
Dual Camera Module
Triple or 3D Camera Module
Penetration Rate (%)
Content
1. 2018 Interim Results Business Review
2. Market Trend Analysis
3. Planning and Outlook of 2H2018
4. Appendix
22
New Material
New Production
Knowhow
New Technology
Large-scale
Intelligence
Production
Vertical
Integration
23
01
02
0304
05
Benchmark with SLR CameraOffer premium functionalities of SLR
camera such as large aperture, optical zoom and high definition by triple
camera and periscope module design
3D Module Continue to develop the single cam speckle structured light 3D module
(mass production), dual cam 3D structured light module (sample), ToF 3D module (sample), SLAM
Miniaturization of ModuleProducts using production knowhow of MOC, MOB and HOC has entered mass production stage in 1H 2018. Yield rate
improved steadily and strive to lower the cost in 2H 2018
Leading in Optical Under-glass FPM Created technology advantage in the 2nd
generation of optical under-glass FPM design (mass production), target to acquire
more customers and projects in 2H 2018. Moreover, committed to develop half
screen and full screen FPM
Camera Module for Automotive Achieved batch shipments of in-cabin monitoring and gesture recognition
camera module for an domestic cutting-edge automotive brand in July. The Group will endeavor to get Tier 2
supplier qualification of other domestic top tier brands in ADAS, surround view,
in-cabin monitoring module etc.
24
As camera modules become more high-end and customized, the competition of camera module makers become a overall competition involving the whole value chain. Company that integrated major components resources such as lens, VCM, FPCB and connectors could establish advantage
Strengthen the control of core components such as
lens and VCM can make the R&D more focused and
favourable to cost control and production flow
optimization
Cost advantage
Camera modules become more high-end and
customized. The integration of major components
resources make overall planning more effective and shorten the R&D cycle, which
helps to build system products
System integration advantage
One-stop shopadvantage
Provide customers with a complete set of design solution, from design,
sampling, trial production to mass production, customers
only need to work with a single supplier which ensure
confidentiality and increase customer stickiness
25
Single machine Automation + Digitization
Machine-to-MachineSystematic data
SystematicIntelligent
Standard production
procedures
Production system
Equipment system
Testing machine connects
automatically
Management system of
production
Advanced technology,
production knowhow,
Precise production
Intelligence manufacturing
model factory
Dynamic intelligent
manufacturing
Machine judgement
Now
FutureTarget
2018 2019 2020
26
1. By 30 June 2018, the camera module production capacity was approx. 34KK/month, including approx. 8KK/month dual camera. The capacity did not increase significantly as compared with the end of last year, mainly because the higher production standard led to an increased capacity consumption for the same product
2. Capacitive type fingerprint recognition module production capacity was 17KK/month and under-glass fingerprint recognition module production capacity was 2KK/month
3. Capital expenditure spent for 1H2018 was approx. RMB 180 million, and the planned capital expenditure for 2H2018 is expected to be approx. RMB 200-300 million
Optimize product portfolio
Acquire overseas customers
27
Content
1. 2018 Interim Results Business Review
2. Market Trend Analysis
3. Planning and Outlook of 2H2018
4. Appendix
Name Title Biography
Mr. FAN Fuqiang
Chief Financial Officer Former Assistant to Chairman of Kunshan Qtech and Served as branch general manager and vice general manager of the corporate department of Heyuan Gao Xin Qu branch of Bank of China
Mr. LIU Tongquan
Deputy General Manager for Production
Served as production manager of Kunshan Giantplus Optoelectronics Technology Co., Ltd.
Mr. HE Ningning
Chairman, Executive Director
Over 20 years of experience in the electrical and electronic industry
Previously worked in Samsung Electro-Mechanics Dongguan Co., Ltd.
Founded Surewheel Asia Pacific Limited, Shenzhen CK and Heyuan CK
Mr. WANG Jianqiang
Executive Director, Chief Executive Officer
Nearly 20 years of experience in the electrical and electronic industry
Previously worked in Samsung Electro-Mechanics (H.K.) Limited
Served as chief financial officer of Shenzhen CK and Heyuan CK
Mr. HU Sanmu
Executive Director, Vice President for Sales
Several years of experience in the electrical and electronic industry
Held various positions in Vtech (Shenzhen) Electronic Limited, Tianjin Amphenol Kae Co., Ltd., and Van Telecom PRC
29
Mr. He Ningningestablished Kunshan QT
One of the few precise components manufacturers with software system background
2007
Started mass production of mobile camera modules
Established COB & COF packaging production line
Became a major supplier of multiple dual-camera projects, mass-produced fingerprint recognition modules and increased market share, and obtained the direct supplier qualification of Huawei camera modules.
Invested in Taiwan lens Company Newmax Technology Co., Ltd. (3630.TW), achieve vertical integration and moving onto 3D imaging and multi-camera development
Achieved a mass production of camera modules ranging from 3 mega pixels to 13 mega pixels
Won core customers including ZTE, Lenovo, Coolpad and TCL
2010-2013Received FPC certification to develop fingerprint recognition modules business
Gradually introduced OPPO, Xiaomi and Huawei as customers and gained the qualification to supply camera modules of all pixels to all customers
2015
2008
The first Chinese company to launch camera modules of 16 mega pixels and 20 mega pixels
Listed on main board of Hong Kong Stock Exchange in December, 2014
20142016-2017
Establishment of production base
Stage of rapid growth
Listed in Hong Kong
Establishment of QT
Two facets development
Strategic transformation
Successfully developed the second-generation under-glass fingerprintrecognition module, and was the first to mass produce 3D front –facing structured light module in China
Continue to expand market share of core customers, accelerate the integration of vertical chains, and achieve synergy
2018
30
31
(RMB M)
638 14112161 2202
4991
7939
2012 2013 2014 2015 2016 2017
(RMB M)
50 163 196102
191
436
7.9%
11.6%9.0%
4.6% 3.8%5.5%
2012 2013 2014 2015 2016 2017
Revenue
Net Profit
Q Technology (Group)
Company Limited
(1478.HK)
Chairman, Executive DirectorMr. HE Ningning
66.39%
Executive Director, Chief Executive Officer
Mr. WANG Jianqiang
0.94%
Executive Director
HU Sanmu
0.17%
Public
Shareholders
32.5%
Shareholder Structure
32