Event description
On August 30, 2023, Mega Intelligence released the half-yearly report of 2023: 2023H1, the company achieved revenue of 1.023 billion yuan,-9.0% year-on-year; net profit of 49 million yuan,-43.6% year-on-year. In the second quarter alone, the company achieved revenue of 580 million yuan, year-on-year-19.8%, month-on-month + 30.9%; net profit of 31 million yuan, year-on-year-50.5%, month-on-month + 68.3%.
Event comment
Sluggish demand is a drag on revenue performance, and the proportion of direct revenue from overseas customers continues to rise: the company's Q2 single-quarter revenue performance has declined compared with the same period last year, of which the profit decline is more obvious,-50.5% compared with the same period last year. The decline in revenue is mainly due to the weak demand from the company's traditional IoT industry customers and FWA customers, which is a drag on the company's overall revenue performance. The decline of homing net profit is higher than that of revenue, mainly due to the increase in R & D and sales costs, the increase in credit and asset impairment losses, and the decrease in non-recurrent profit and loss. From a regional point of view, the size of the company's customer base is still expanding, in which the number and business scale of overseas customers are significantly higher than those in China, and the revenue share of overseas customers has increased, from 24.40% of 2022H to 31.06%. The continuous expansion of the customer base and the rapid growth of overseas markets are conducive to the sustained and healthy development of the company's business.
Profitability has improved, and continue to increase sales and R & D investment: Q2 gross profit margin of 18.7%, year-on-year + 1.5pct; net profit rate of 5.2%, year-on-year-3.3pct. The increase in gross profit margin is mainly due to changes in the product structure, an increase in the proportion of shipments of high-margin products such as vehicles and high computing power, and a decrease in shipments of products such as NB\ CAT1, which have relatively low gross profit margins. The company's Q2 sales / management / finance / R & D expense rates are 2.8%, 2.4%, 0.8%, 10.3%, respectively, compared with the same period last year + 1.4pct/+0.6pct/-1.1pct/+3.0pct. Sales and R & D expenses have increased rapidly, and the company has increased its investment in 5G intelligent cockpit, 5G intelligent T-Box and high-computing AI modules; in terms of market, the company has increased its focus on terminal car factories, head TIER1, drones, servers and overseas customers.
With the introduction of various general purpose models, industry models and end-to-side models, the demand for computing power on the module side and terminal side of related industries and customers will increase sharply, thus driving the penetration of AI modules in the overall module industry to accelerate. The company has increased its investment in marketing and R & D of computing module products, and has taken the lead in launching high-computing modules with comprehensive AI computing power of 48T in the industry, constantly promoting the development of high-computing AI modules. The company's high computing power module products show a flexible configuration of computing power + algorithm + communication, standard AI computing power & customized commercial AI algorithm software and hardware environment & optional communication ability, will fully benefit from the high computing power applications such as AIGC, general large model, industry large model and so on.
Profit forecast and investment advice: due to the weak demand of the company's traditional IoT industry customers and FWA customers, the company's 23Q2 revenue and profit have declined. The proportion of the company's high-margin products shipments has increased-the increase in the proportion of overseas business has led to the improvement of gross profit margin, and the rapid increase in sales and R & D expenses is mainly due to increased investment in new areas and new customers. With the rapid growth of the demand for computing power on the module side and terminal side, the penetration of high computing power AI modules will be accelerated. As the earliest layout computing module products in the industry, the company has a comprehensive product range, and will fully benefit from the application of high computing power requirements such as AIGC, general large models, industry large models and so on. We estimate that the company's homing net profit from 2023 to 2025 will be RMB 1.39 million, respectively, an increase of 9%, 48% and 37% over the same period last year, corresponding to the PE of 55-37-27, maintaining the "buy" rating.
Risk hint
1, the risk of market development and market competition in the field of wireless communication modules and solutions; 2, the risk of loss of core technical personnel and leakage of core technology.