1Q22 beat and solid guide despite headwinds. MediaTek’s 1Q22 results came in slightly b-t-e with rev rising 11% to TWD143bn and GM/OM rising to 50%/26% driven by strength in all three segments. The company lowered smartphone market expectations given macro uncertainties and weak China demand but largely maintained the rev growth expectations of 20% in 2022 and 15% in the next 3 years. Despite rising concerns of competition, MediaTek plans to focus on profitability and expressed confidence in strong 5G offerings. We lower our 2022E/2023E rev and OP est. by 4%/4% and 5%/10%, respectively, to reflect the weaker macro environment and softening smartphone demand. We continue to believe MediaTek is well-positioned L-T as 5G smartphones adoption and strength in non-smartphone businesses continue. Valuation is approaching a trough level at 10x fwd P/E, lowest since 2008 GFC, which could provide some downside protection. We maintain BUY rating but lower PT from TWD1,500 to TWD1,200, based on 13x 2022E P/E (prev. 17x) to reflect lowered earnings est.

2454 TT

MediaTek Inc.

Asia Technology

L-T Outlook Remains Strong Despite N-T Headwinds

Positive L-T Outlook; Potential N-T Cyclical Headwind

Strong Topline Growth and Margin Expansion