The share price of AAC has recorded a significant correction recently, as several analysts have lowered their estimates for iPhone X shipments in the past few weeks which had weighed on sentiments. However, Apple’s latest released quarterly report showed that even the iPhone units shipped in the quarter recorded a year-on-year decline, ASP for the iPhone increased 15% yoy, indicating that the iPhone sales were not as bad as market previously expected. While Apple is the biggest customer of AAC that made up nearly half of AAC total revenue in the past, a not-so-bad iPhone sales would be positive to AAC’s near-term price performance. We believe orders from Android phone brands can contribute more incomes to AAC in the future. The rapid product and technology upgrades have been lucrative for AAC, including upgrades to acoustic solutions such as stereo-sound and water-proof features, the adoption of haptics components, hybrid lenses, and 3D sensing lenses. These new verticals should keep the momentum of expansion of AAC. Coupled with the prospects of continuous expansion and undemanding valuation relatives to leading industry peers, AAC would benefit from money inflow once the HK equity market stabilized and we recommend investors to accumulate the shares on weakness.

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