豪威集团（603501）：Early signs of inflection at a cyclical trough

豪威集团(603501) 　　OmniVision reported 1H26 revenue of RMB14.0bn, flat YoY, while net profit fell39.9% YoY and GPM declined 1.7ppt YoY to 28.8%, as lower-margin distributionrevenue rose 41% YoY to 23% of total sales. 2Q26 revenue rose 18.7% QoQ toRMB7.61bn, exceeding guidance of RMB7.15-7.54bn and Bloombergconsensus of RMB7.4bn, although GPM remained soft at 28.3%. The 3Q26guidance of RMB7.58-8.13bn revenue and 29.4-30.7% GPM points to modestsequential growth but a clearer margin recovery. We cut 2026E/27E revenue by12%/12% and GPM by 2.1ppt/2.9ppt factoring in the results. Nevertheless, wemaintain BUY as earnings approach a cyclical trough and the mix shifts towardhigher-value applications. We lower our TP to RMB125, based on 33x 2027EP/E (previously 33x 2026E), below its two-year historical forward avg. P/E of36.7x to reflect cyclical weakness. 　　Mixed segment performance, but higher-value applications remainedresilient. Consumer-electronics CIS revenue fell 31% YoY and accountedfor 31% of CIS sales, reflecting weak smartphone demand and producttransitions. Auto CIS declined 16% YoY and represented 34% of CIS sales,as inventory adjustments weighed mainly on 1Q26; however, demandrecovered visibly in 2Q26 and should benefit from rising camera content andhigher-resolution ADAS adoption. In contrast, professional-imaging CISgrew 53% YoY to 14% of CIS sales, machine-vision and robotics CISincreased over 70% YoY, medical CIS rose 15% YoY, auto analog expanded67% YoY, and display solutions grew ~13% YoY. This divergence suggestsa structural product-mix transition rather than a broad-based deterioration incompetitiveness, in our view. 　　Robotics, auto analog and optical connectivity are emerging as newgrowth engines. Higher-end robotic data-collection systems can carry overUS$100 of image-sensor content, offering meaningful upside despite thebusiness’s small current base. In auto analog, OmniVision is expandingacross MCU, PMIC and SBC products, leveraging its established customerbase to evolve from a sensor vendor into a platform supplier. Opticalconnectivity could offer an even larger opportunity, with mgmt. estimatingthat its product portfolio could provide US$10 or more of semiconductorcontent per optical module, depending on product adoption. We thereforeview optical connectivity as meaningful long-term earnings optionality ratherthan a material near-term contributor. 　　OmniVision is entering a gradual recovery. Volume stabilization becamevisible in 2Q26, while margin normalization should begin in 3Q26. Structuralearnings expansion is more likely in 2027, when higher-value businessesshould contribute for a full year. Maintain BUY with TP of RMB125. 　　Key risks: Slower-than-expected product R&D, weak demand recovery, etc.