Wingtech released its 3Q23 results with revenue/NP growth of 11.9%/11.4% YoY and 2.9%/5.5% QoQ, respectively. The Company’s gross margin remained consistent while improving slightly from 17.3% in 2Q23 to 17.4% in 3Q23. We continue to see strength in Company’s legacy business, which alleviated market concerns on its legacy business’ competitiveness and new business’ integration and growth as we previously expected (link). Maintain BUY with unchanged TP of RMB68.

ODM: The Company’s ODM business segment saw revenue growth of 24.3% YoY and 4.6% QoQ, respectively. This was also the second consecutive quarter that the Company saw its ODM business turning profitable even under the current macro environment. Additionally, ODM segment’s GPM/NPM rose from 8.8%/1.1% in 2Q23 to 10.0%/2.3% in 3Q23, respectively, confirming these businesses are back on track for growth. The decent recovery in ODM segment should ease some investors’ concern regarding the sustainability of its ODM recovery. The management team is also confident to see growth in ODM in 2024.

Semi: The Company’s semi business segment saw its revenue decline by 6.8% YoY but increased by 4.1% QoQ, respectively. GPM/NPM of semi business segment saw decline from 41.3%/18.9% in 2Q23 to 37.7%/17.1% in 3Q23, respectively, mainly due to longer-than-expected weakness of semi down cycle. Looking forward, we believe the Company’s semi business will continue to show strength. The Company has strategically positioned its semiconductor business segment, Nexperia, to more effectively address the specific requirements of its diverse downstream customers. We anticipate that there will be sustained demand for the company's auto products, thanks to its ongoing efforts to enhance the performance of its MOSFET products.

Maintain BUY with unchanged TP at RMB68, based on the same 25x FY24E P/E, slightly below avg. 1-year forward P/E multiple. Upside catalysts: 1) new 12-inch factory to progress as planned; and 2) ODM and optical modules’ new projects to begin mass production. Downside risks: 1) macro challenges such as overseas inflation and slowdown in economic growth; 2) delay/disruption in operations; and 3) further share selling from major shareholders.