Event: The company released its 2022 annual report on April 24. It achieved revenue of 415 million yuan in 2022, -21.20% year on year; realized net profit of 54 million yuan, or 35.97% year on year; realized net profit of 31 million yuan, minus 48.05% year on year. The first quarter report of 2023 was also released on April 29. Q1 of 2023 achieved revenue of 81 million yuan, -6.23% year on year, -23.99% month on month; net profit returned to the mother was 0.08 million yuan, -23.68% year on year, +57.17% month on month; net profit was deducted from non-net profit of 0.1 million yuan, -89.55% year on year, turning loss into profit from the previous month.

Weakness in consumer electronics affected Q1 revenue, and high R&D investment guarantees product iteration: In 2022, the company's revenue declined significantly throughout the year due to various factors such as slowing macroeconomic growth, European and American inflation and international tension, and weak demand in the global consumer electronics market. Q1 revenue declined slightly in 2023 due to weak demand in the consumer electronics market. The company's gross margin in Q1 2023 was 41.00%, -1.52 pcts year on year, +4.34 pcts month on month; net interest rate was 9.84%, -2.24 pcts year on year, +5.08 pcts month on month. In terms of expenses, the sales expense rate/management expense rate/R&D expense rate/financial expense ratio for Q23 was 3.87%/7.96%/32.60%/-10.65%, respectively. The changes over the same period were -0.35/-0.03/-1.28/+0.29pct, respectively. As the company increased its R&D efforts in Q1 '23, R&D expenses were +10.39% compared to the same period last year, ensuring continuous iterative upgrading of the product line.

The successful introduction of Bluetooth SoC chip products is expected to continue to benefit from the growth of the Bluetooth market: the Bluetooth audio SoC chip series is the company's main product line. Among them, the Bluetooth speaker chip is the company's main product and an important source of revenue. It mainly serves Sony, Harman, Anker Innovation, Huawei, Xiaomi, Logitech and other domestic and foreign first-tier and second-tier terminal brands; the TWS Bluetooth headphone SoC chip is the first place where the company laid out the Bluetooth wearable market. The products have entered the supply chain of terminal headphone brands such as Honor, Realme, Voice, JBL, Basis, TOZO, QCY, Baidu, etc.; the smartwatch SoC chip is the company's key layout direction. The first-generation smartwatch chip has been mass-produced and used as the main control chip. Among various terminal watch models such as India's leading brands Noise, Fire-Boltt, and BOAT, the next generation of smartwatch chips has already entered the streaming stage and is expected to be introduced to the market in 2023. According to SIG forecasts, global annual shipments of Bluetooth audio transmission devices will reach 1.84 billion units in 2027, with a compound annual growth rate of 6% from 2023 to 2027. Despite being affected by macroeconomics, international conditions, and global inflation, Bluetooth audio continues to grow linearly. Among them, shipments of Bluetooth speakers are expected to reach 360 million units in 2023, and shipments of Bluetooth smartwatches are expected to be 143 million yuan in 2023. The company's Bluetooth audio SoC chip series products have entered domestic and foreign tier 1 and 2 terminal brands in various market segments. It is expected that they will benefit from the continuous growth of the Bluetooth audio SoC market and ensure a steady increase in the company's Bluetooth audio SoC chip revenue.

The intelligent voice market has broad prospects, and AI development is driving performance growth: intelligent voice interaction is an emerging market with a wide range of downstream applications. The company continues to develop intelligent voice interaction product applications that can be implemented in conjunction with voice technology. Currently, chips are mainly used in smart offices and smart homes. Among them, smart voice recorder chips have covered terminal brands such as iFLY, Philips, and Hanwang of HKUST. According to the forecast of the Huaqing Industry Research Institute, the global smart voice market will reach 39.92 billion US dollars in 2023, with Nuance, Google and Apple accounting for a relatively high market share; in 2023, China's smart voice market will reach 38.2 billion yuan. Among them, iFLYTEK and Baidu occupy a high market share. With the rise of generative AI such as ChatGPT, voice technology is also rapidly advancing. The company is closely following the development trend of voice technology and AI industry. Intelligent voice interaction SoC chips are expected to benefit from the vast market of intelligent voice, bringing new growth points to the company's revenue.

First coverage, giving an “increase in ownership” rating: The company's main business is R&D, design and sales of high-end smart audio SoC chips. The main products include Bluetooth audio SoC chip series, portable audio and video SoC chip series, smart voice interaction SoC chip series, etc., which are widely used in Bluetooth speakers, smart watches, Bluetooth headsets, Bluetooth transceivers, wireless microphones, gaming headphones, Bluetooth remote controls, smart offices, smart homes, etc. Through the implementation of smart Bluetooth audio chip upgrades and industrialization projects, ultra-low power MCU R&D and industrialization projects for wearables and IoT fields, R&D center construction projects and development and technology reserve funds, etc., the company can continuously optimize and upgrade the existing product series and iterate on more advanced chip products, which is expected to seize the market opportunities of Bluetooth and smart voice and provide a guarantee for the company's business development. In 2023-2025, the company's net profit is estimated to be 68 million yuan, 108 million yuan, and 123 million yuan respectively; EPS is 0.56 yuan, 0.89 yuan, and 1.01 yuan respectively; corresponding PE is 61X, 39X, and 34X respectively.

Risk warning: Risk of macroeconomic fluctuations, downstream demand falling short of expectations, risk of loss of core personnel, risk of technology development and iterative upgrading, and increased market competition.