Broker: UOB Kay Hian
Date of Report: Friday, 22 August 2025
AAC Technologies (2018 HK) 1H25 Review: Margin Miss Amid Product Transition, Strong Rebound Expected in 2H25
Investment Highlights: Buy Maintained with 32% Upside
AAC Technologies Holdings (2018 HK), a leader in miniature acoustic components for mobile, IT, consumer electronics, automotive, and medical devices, has released its 1H25 results. The report, produced by UOB Kay Hian, keeps a BUY rating on AAC Technologies, with a target price of HK\$57.70 and a substantial 32% upside from the current share price of HK\$43.72.
Snapshot: Key Stock Data
- Market Cap: HK\$52,398m (US\$6,761m)
- Shares Issued: 1,199 million
- 3-month Avg Daily Turnover: US\$29.9m
- 52-week High/Low: HK\$54.80 / HK\$27.40
- Major Shareholders: Mr. Benjamin Pan & Ms. Ingrid Wu (41.6%)
1H25 Results: Revenue Meets, Margins Miss, Bottom Line Surprises
AAC Technologies’ 1H25 results were a mixed bag: revenues aligned with consensus, but gross margins fell short due to a transition in the acoustics segment and product mix changes. Nevertheless, net profit beat expectations thanks to a significant one-off fair value gain.
| Metric |
1H25 |
2H24 |
1H24 |
YoY Change |
HoH Change |
| Revenue (Rmbm) |
13,318 |
16,081 |
11,247 |
+18.4% |
-17.2% |
| Gross Profit (Rmbm) |
2,754 |
3,624 |
2,418 |
+13.9% |
-24.0% |
| Attributable Net Profit (Rmbm) |
876 |
1,260 |
537 |
+63.1% |
-30.5% |
| Gross Margin (%) |
20.7 |
22.5 |
21.5 |
-0.8ppt |
-1.9ppt |
Key Observations:
- Revenue growth driven by all segments, notably precision & electromagnetics (+27.4% YoY), optics (+19.7% YoY), PSS (+14.2% YoY), and SSE (+56.2% YoY).
- Gross margins missed market expectations (20.7% vs. 22.8%) due to a lower share of high-margin acoustics and higher contribution from lower-margin business lines.
- Net profit was boosted by a one-off gain of Rmb320m (fair value change of contingent consideration payables for PSS).
Financial Performance and Forecasts: A Multi-Year Overview
AAC’s outlook remains robust, with forecasts indicating strong revenue and profit growth through 2027. The company is expected to deliver improved profitability as the transition in product mix stabilizes.
| Year (Rmbm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
20,419 |
27,328 |
31,941 |
35,251 |
38,323 |
| EBITDA |
3,975 |
5,178 |
6,350 |
7,429 |
8,397 |
| Net Profit (Adj.) |
740 |
1,797 |
2,382 |
3,023 |
3,569 |
| EPS (Fen) |
62.6 |
152.8 |
202.5 |
257.1 |
303.5 |
| PE (x) |
63.5 |
26.0 |
19.6 |
15.5 |
13.1 |
| ROE (%) |
3.4 |
7.9 |
9.6 |
11.1 |
11.8 |
Segmental Analysis and 2025 Guidance Updates
Acoustics: Transition Phase, Margin Recovery Ahead
- 1H25 margin pressure due to new products entering mass production, lowering short-term efficiency.
- Management expects full-year acoustics margin to remain above 30% as new products scale up.
Optics: Plastic Lenses Drive Margin Expansion
- Industry shift to plastic lenses pushes ASPs higher; plastic lens margins exceeded 30% in 1H25.
- Hybrid lens margin already above 35%, with breakeven targeted in 2026 and shipment volumes ramping from 10-15m in 2025 to 20m in 2026.
- Long-term plastic lens margin target is ~40%.
Precision Mechanics: Thermal Solutions Gain Prominence
- Launched industry’s first large-sized aluminum alloy liquid-cooled vapor chamber, addressing high-end device thermal management.
- Thermal business expected to triple in 2025, with revenue surpassing Rmb1.2b, driven by a major customer ramp-up.
Electromagnetics: Haptics in Foldables
- Multiple haptic motors to become standard in high-end foldable smartphones, aligning with AAC’s strength in ultra-thin motors.
- Tier-1 international and domestic customer demand remains strong for AAC’s haptic solutions.
PSS (Premium Sound Solutions): Automotive Focused Growth
- Secured design win from a domestic NEV player for a flagship luxury SUV.
- Acquisition of First Light, adding a suite of automobile-grade microphone products and strengthening AAC’s automotive acoustics portfolio.
Sensors & Semiconductors (SSE): Cockpit Wins
- Multiple wins in intelligent cockpit modules, including accelerometers and microphones for luxury NEV brands.
Earnings Revision and Valuation
- 2025-26 earnings lowered by 3.0%/0.3%, 2027 forecast raised by 3.9% due to updated revenue growth and margin assumptions by segment.
- Target price maintained at HK\$57.70, based on 20.4x 2026F PE (five-year historical forward mean).
Revised Key Estimates: Old vs. New
| Segment |
2025F Old (Rmbm) |
2025F New (Rmbm) |
Change (%) |
| Acoustics |
8,625 |
8,871 |
+2.9% |
| PSS |
4,044 |
4,220 |
+4.3% |
| Precision & Electromagnetics |
11,166 |
11,652 |
+4.3% |
| SSE |
967 |
1,199 |
+24.0% |
| Optics |
5,750 |
6,000 |
+4.3% |
Financial Health and Growth Metrics
| Metric |
2024 |
2025F |
2026F |
2027F |
| EBITDA Margin (%) |
22.1 |
23.2 |
24.2 |
24.9 |
| Net Margin (%) |
6.6 |
7.4 |
8.6 |
9.3 |
| ROE (%) |
7.9 |
9.6 |
11.1 |
11.8 |
| Debt to Equity (%) |
7.9 |
3.2 |
(4.3) |
(12.8) |
Conclusion: Recovery in Sight, AAC Well-Positioned for Growth
AAC Technologies is navigating a transitional period in its product mix, which has led to temporary margin compression. However, accelerated revenue growth in all segments, margin recovery in acoustics and optics, and breakthrough products in precision mechanics are set to drive a meaningful recovery in 2H25 and beyond.
The company’s financials remain robust, and its strategic moves—such as the First Light acquisition and leadership in thermal management—position it well for sustained, long-term growth. UOB Kay Hian reiterates its BUY rating and maintains a positive outlook on AAC Technologies, supported by upward revisions in revenue across all segments and a compelling valuation.
Investors should watch for signs of margin improvement in the coming quarters as new products ramp up and the business mix stabilizes.
