Everbright Securities has released a research report indicating that Cowell (01415) delivered robust performance in 2025, validating the thesis of its increasing share within its core client's supply chain. The company achieved revenue of $3.50 billion, representing a significant year-on-year increase of 40.3%, primarily benefiting from increased orders for rear camera modules from its key customer. Looking ahead to 2026, as AI accelerates its penetration from the cloud to end-user devices, demands for enhanced imaging and sensing capabilities in products like smartphones and PCs are rising. As a core supplier of optical components, the company is positioned to benefit substantially.
Everbright Securities is optimistic about the company's sustained growth trajectory amid smartphone optical upgrade trends, as well as its significant potential for expansion into new growth markets such as AI glasses and robotics. The firm maintains its 2026 net profit attributable to shareholders forecast for Cowell at $230 million. However, considering that the progress of the key customer's main rear camera might be gradual and that the company will increase R&D investment to support long-term growth for 2027-2028, Everbright has revised its 2027 net profit forecast down to $290 million (from a previous forecast of $340 million) and introduced a new 2028 net profit forecast of $360 million. The "Buy" rating on the stock is reaffirmed.
The main points from Everbright Securities are as follows: Event: The company released its annual results for 2025. 1) Revenue: Revenue reached $3.50 billion, a sharp 40.3% increase year-on-year, mainly driven by higher orders for rear camera modules from the core client. 2) Gross Margin: The gross margin for 2025 was 10.2%, down from 11.7% in 2024, primarily due to product mix changes and ongoing pricing competition pressures. 3) Expenses: Administrative expenses grew 18.0% year-on-year to $128 million, largely attributable to an increase in R&D spending of approximately $28.9 million, reflecting the company's forward-looking investment in future new projects and technological upgrades. 4) Net Profit: Net profit attributable to shareholders was $197 million, surging 65.4% year-on-year, corresponding to a net profit margin of 5.6%, an improvement of 0.8 percentage points from 4.8% in 2024. This indicates a significant enhancement in profitability alongside rapid revenue growth.
The company's proactive adoption of AI technology and its excellent operational efficiency highlight its competitive advantages, laying the groundwork for continued market share gains. Although the gross margin experienced slight fluctuations due to product mix changes, the net profit growth rate (+65.4% YoY) far exceeded revenue growth (+40.3% YoY), leading to a steady improvement in net profit margin. This underscores the company's strong cost control and full-chain operational optimization capabilities during the introduction of new products. This ability to translate technological advantages into profitability represents a core competitive moat in the precision manufacturing sector, granting the company strategic initiative in securing new orders from key clients. Furthermore, in terms of expense control, the company comprehensively integrated AI in the second half of 2025, covering production, R&D, and supply chain, leading to a restructuring of its manufacturing system. The number of employees increased marginally from 6,728 at the end of June 2025 to 6,854 by year-end, adding just over 100 people. Despite this minimal headcount increase, the second half of 2025 generated over $2.1 billion in revenue, demonstrating a marked improvement in per-employee efficiency.
The year 2026 is expected to usher in an AI-driven optical innovation cycle, providing a clear growth path for the company. As AI permeates from the cloud to devices, requirements for imaging and sensing in smartphones and PCs will intensify. As a key optical component supplier, the company stands to benefit deeply. The assessment is as follows: 1) Leveraging industry-leading yield rates and automation capabilities, the company is likely to capture additional market share in the rear camera module sector it has already entered. 2) The company is expected to begin supplying camera modules for a foldable iPhone in 2026 and potentially enter the main rear camera supply chain for the iPhone by 2027. 3) Cowell is positioned to become a core supplier of camera modules for Apple's diverse wearable devices, such as TWS earbuds with integrated cameras, smart glasses, and AR/VR headsets, with some products potentially entering mass production between 2026 and 2027. 4) The company is actively utilizing AI to restructure its R&D and production systems, creating a deeply integrated model of "data-driven, AI-collaborative, manufacturing-implemented" to build technological barriers and ensure high-quality growth.
Earnings Forecast, Valuation, and Rating: Cowell's strong 2025 performance confirms the logic of its rising share within its core client's supply chain. The outlook remains positive for the company's continued growth driven by smartphone optical upgrades and its expansion into new frontiers like AI glasses and robotics. The 2026 net profit forecast is maintained at $230 million. However, considering the potentially phased rollout of the key client's main rear camera and increased R&D investments for long-term 2027-2028 growth, the 2027 net profit forecast is adjusted downward to $290 million (from $340 million previously), with a new 2028 forecast of $360 million. The "Buy" rating is maintained.
Risk factors include high customer concentration, global smartphone shipments falling short of expectations, and potential delays in technological upgrades.