In July, the company announced a buyback plan of up to HK$320 million. In September, repurchases intensified, yet the share price fell rather than rose, and COWELL (01415), which first gained and then retreated, may have been unfairly sold off by the market.

According to Zhitong Finance APP, COWELL authorized and approved a share repurchase plan of up to HK$320 million on July 13, began buying on August 19, and had cumulatively repurchased 4.61 million shares by October 2, with repurchase spending exceeding HK$100 million. Boosted by the buybacks, the company's share price rose 23% in August, but then began falling in September, declining more than 11%. So far this year, its market value has corrected 18%, and since September 2025 it has nearly halved from its high.

Yet the company's results are growing strongly. In the first half of 2026, revenue and profit continued double-digit growth. On one side is the tug-of-war of falling prices despite more buying, as buybacks fail to stop the valuation decline; on the other is the interim report card showing both revenue and profit growth. Which side does COWELL's valuation scale ultimately favor?

Double growth in a headwind, low margins but high ROE

COWELL is a precision optical module supplier whose customers span smartphones, multimedia tablets, intelligent driving, and other mobile terminal devices. It is a core supplier to Apple, and its performance is highly dependent on Apple. In the first half of this year, the industry overall remained in an adjustment trend, but Apple's sales grew against the trend.

According to IDC data, global smartphone shipments overall declined, falling 4.1% in the first quarter and 6.7% in the second quarter, while Apple's shipments rose 3.3% and 15.3%, respectively, with global market share reaching 20% and firmly holding second place. Among this, the China market made a core contribution, growing as much as 24.9% in Q2.

Benefiting from Apple's performance growth, COWELL also delivered double growth against the wind, achieving revenue of US$1.605 billion in the first half, up 18% year on year, and net profit attributable to shareholders of about US$90 million, up 33.3% year on year. In the first half, COWELL's largest customer (Apple) contributed US$1.593 billion in revenue, up 19.4% year on year, with its revenue share rising to 99.3%. Among this, the China market contributed the most, generating US$1.48 billion in revenue, up 20.3% year on year, with its revenue share rising to 92.2%.

Over a longer period, under heavy dependence, COWELL is highly sensitive to Apple's performance cycle. From 2023 to 2025, both revenue and profit maintained a high-growth trend, with revenue posting a compound growth rate of 94.6% and net profit attributable to shareholders a compound growth rate of 105.6%. Image source: company financial reports. Profit growth outpaced revenue, mainly because operating leverage continued to be released.

COWELL's contract manufacturing nature means margins will not be too high, but shareholder returns are not low. In the first half, gross margin was 11.22%, relatively stable compared with previous years, but period expenses, including selling, administrative, and financing expense ratios, were all optimized. In the first half, the period expense ratio was 4.99%, down 0.9 percentage points year on year, the net profit margin attributable to shareholders was 5.6%, up 0.7 percentage points, and annualized ROE reached 22.3%.

Growth expectations exist, but bottoming has not ended

Apple is COWELL's base, and high dependence is both a risk and a safeguard. The company is deeply involved in multiple new Apple product categories and has growth expectations. In the first half, Apple's sharp sales growth against the trend made the company's demand strong. In Q3, Apple's sales in China continued to grow 0.6%, and new products in Q4 are driving continued sales strength, with full-year sales potentially providing the company with robust orders.

Moreover, from a medium- to long-term perspective, Apple is expected to launch entirely new categories from 2026 to 2027, including foldable devices, 20th-anniversary phones, AI earbuds, AI glasses, and home robots, which also provide growth protection for COWELL. High dependence always carries risk. The company is actively opening a second growth curve, deploying MicroLED-related optical technology, exploring innovative application opportunities in optical communications, AR, and other fields, and, with its deep accumulation in high-precision optical sensing products, making forward-looking arrangements in new robotics businesses.

In addition, the company closely follows AI development trends, pushing AI technology from "product empowerment" to deeper "system empowerment," realizing a dual-drive structure of base business plus new growth curve. However, the new growth curve has not yet taken shape and has not yet driven performance. But one of the company's greatest strengths is its clean finances and ample cash resources, which allow it to resist cyclical risks and achieve pro-cyclical expansion as well as new business expansion.

As of June 2026, the company had current bank loans of US$134 million and non-current bank loans of US$8 million, totaling US$142 million, accounting for only 9.37% of total assets, while cash equivalents were US$404 million, 2.85 times interest-bearing debt. It is worth noting that Apple is the biggest variable in COWELL's performance growth, but the market value growth trend is not consistent. Over the past three years, Apple's market value has continued to rise, while COWELL has fallen from highs, with fundamentals-driven performance becoming distorted and entering a technical bear market.

After the sharp valuation pullback, the company's PE (TTM) is only 11 times, while the Hong Kong stock mobile phone supply chain PE is 24 times, far below the industry level. Data source: relevant trading software. Why do COWELL's market value and performance move in opposite directions? There are mainly three reasons: first, smartphone shipments continue to decline, and although AI-driven high-end phone sales are growing, the structural adjustment has not effectively prevented the industry from entering a recession; second, the new growth curve has not taken shape and expectations are not high, causing the stock trend to stay in line with mobile phone industry expectations while sensitivity to Apple's performance is generally limited; third, even though market value has fallen sharply, under the long-term bull trend there are still many long-term profit-taking positions, and combined with pressure from trapped positions, hot money is not in the mobile phone sector, causing the valuation to continue bottoming.

To boost market confidence, the company announced "share buybacks plus equity incentives," repurchasing its own shares at a total consideration of no more than HK$320 million and granting 12.929 million award shares to 181 directors and employees, accounting for 1.49% of issued shares, of which four directors account for 0.21%. The company's valuation mainly lacks driving factors. Buybacks support the share price, while equity incentives are highly tied to performance targets. If the new growth curve produces significant results, the valuation will also reach a turning point.

From the perspective of brokerage and investment bank views, Everbright Securities believes that AI is driving a new optical innovation cycle, COWELL's medium- to long-term growth path is clear, and it is bullish on the company's continued growth under the mobile phone optical upgrade trend, as well as the huge space for expansion into new blue ocean markets such as AI glasses and robotics. A JPMorgan research report said that COWELL benefited from better-than-expected Apple product orders and improved yield and efficiency, with first-half net profit growth above expectations. The current share price is only equivalent to 10 times forecast 2026 PE, 40% below the historical average. It expects strong profit growth to support a valuation re-rating and raised its target price to HK$48.

Overall, COWELL's performance remains strong, but its valuation has diverged. Over the past year, it has pulled back nearly 50% from its high. This year's buybacks and equity incentives have boosted confidence, and most investment banks are optimistic and have raised target prices, but this has not changed the downward trend. The three major reasons have led to the company's valuation being unfairly sold off by the market. However, the company's fundamentals have support and, relying on Apple, it has growth expectations. But buybacks are still continuing, bottoming has not yet ended, and the valuation turning point remains to be verified by the next financial report.