We have recently added Willsemi as one of our top picks, given that it is regarded as a true beneficiary of 1) AI apps proliferation among edge devices, 2) accelerating penetration of ADAS/AD features on smart vehicles and 3) localization trend of semiconductors. The company’s CIS products arecrucial in key end markets, including mobile/laptops, automobiles, AR/VR glasses and other AI-enabled products. We project Willsemi’s revenue to grow by 27% YoY to RMB33bn in 2025E, driven by 25%/40% YoY growth from mobile/auto CISsales. Maintain BUY, with TP revised up to RMB176, corresponding to 41x 2025E P/E.

Willsemi’s auto CIS sales to grow on 1) higher market growth (2024/25E: 3%/12%) from ADAS/AD democratization and 2) market share gains. ADpenetration rate is expected to accelerate as BYD has recently announced it will equip its proprietary "God's Eye" ADAS across its entire fleet, includingmodels below RMB100k (news). We project the auto CIS market to expandon greater camera shipment (10% more cameras installed per vehicle) and a mild benefit to ASP driven by resolution upgrade to 8MP. Based on ourforecast, Willsemi became No.1 supplier in auto CIS market in 2024 byvalue, surpassing Onsemi (ON US, NR) for the first time (est. 37% vs. 34%).

We think the company will continue its market share expansion in the coming years, given its 1) full range of auto CIS products offerings (i.e.,8MP OX08D10 and 12MP OX12A10) and 2) a stronger supply chainpartnership with domestic automakers.

China’s DeepSeek momentum to continue consolidating towards edge devices, with Willsemi as a true beneficiary. We have previouslyhighlighted that DeepSeek is a disruptive milestone, allowing vertical segment to independently develop their own LLM or AI-driven functionalities catered to their specific needs. We think Willsemi stands to gain from 1) resumed replacement cycle of mobiles/laptops driven by new AI-features and domestic consumption incentives (trade-in schemes/consumer electronic subsidies), 2) incremental demand from edge-AI devices, such as AI glasses and robotics.

We project Willsemi’s mobile CIS sales will grow by 25%/20% in 2025/26E.

Maintain BUY, with TP revised up to RMB176. We expect AI-drivenfeatures will continue to proliferate across consumer electronics. Willsemi’s CIS products span across smartphones, auto, security, IoT, notebooks, and medical sectors, all of which present new AI-driven market opportunities. We revise up 2025E NP forecast by 5%, reflecting better margin on auto CIS (higher resolution and tighter supply). New TP is based on 41x 2025E P/E (vs. prev. 32x), close to 2-year historical avg. (43x) and equal to 2024-26E NP CAGR of 41% (PEG ~1.0). We revise up the valuation multiple as we believe the company will see further re-rating opportunities with increasing exposure to AI applications.