Investment suggestion

The company is the leader of domestic electroacoustic enterprises. Benefiting from the innovation of consumer electronics products driven by AI and the rise of various kinds of audio import demand, the company seizes the opportunity to open up a new growth curve, including car audio, XR electroacoustic components, intelligent speakers combined with generative AI, etc., and forms close business ties with technology enterprises and automobile enterprises. We think the company's growth prospects have improved significantly.

Reasons

Car audio drives profit growth and structural improvement: 1) the company announced that it has set up a professional car audio team and obtained orders for car audio projects from domestic and foreign head car enterprises. Product types include car speakers, power amplifiers, on-board intelligent voice robots, AVAS and so on. 2) We expect the company's car audio business to contribute about 61 million yuan in 2025, 2022-2025 CAGR 69%. 3) We are optimistic that the company will make use of the profound accumulation in the acoustics field to open up new customers in the automotive field, as well as the profit growth and profit structure improvement brought about by the automotive business.

AIGC intelligent speaker and XR business drive the valuation center upstream: 1) Guoguang Electric Appliance is the leader of domestic acoustics enterprises, which has the advantages of technology, scale and customer resources in electroacoustic manufacturing and intelligent speaker supply chain. The company is an important supplier to Harman, Amazon.Com Inc, Baidu, Inc., Huawei and other head audio enterprises and technology enterprises. 2) the experience of traditional intelligent speakers is not mature and its development is in a bottleneck. With the combination of generative AI and intelligent speakers, the experience of using intelligent speakers has been improved, and the market has made a further breakthrough. The Vifa ChatMini that the company has launched is the world's first commercial AI speaker equipped with GPT. 3) the company has achieved rich cooperation in XR, and has mass-produced acoustic modules for M and P customers of global XR manufacturers, and has completed the assembly production line of VR integrated machine.

Improve business efficiency, employee stock ownership plan to enhance enterprise vitality: 1) the company was originally a traditional black electricity audio enterprise, with the beginning of 2019, the emergence of a new management team and new market opportunities, the company began to actively pursue the improvement of business quality. 2) in April this year, the company released the third phase of the employee stock ownership plan, covering 350 employees, of which 340 core technical and management personnel except senior executives own 72% of the shares, which helps to enhance the enthusiasm of the team. 3) from February to April this year, the company bought back a total of 16.6 million shares for the employee stock ownership plan, the repurchase amount was 248 million yuan, the average repurchase price was 14.93 yuan, and the transaction price was between 13.57 yuan and 16.50 yuan, indicating the company's confidence.

Profit forecast and valuation

As the performance flexibility brought about by the company's new business mainly falls in 2025, we keep the company's profit forecast for 2023 and 2024 unchanged. The current share price corresponds to 35 times, 26 times 2023 and 2024 price-to-earnings ratio. Maintain an industry rating that outperforms. Taking into account the rebound in the valuation hub of the industry, according to the SOTP valuation method, we raised the target price in 2024 by 9% to 19.03 yuan, corresponding to 48 times, 35 times 2023, and 2024 price-to-earnings ratio, which is 36% higher than the current stock price.

Risk

The development of new business is not as expected, market competition intensifies, raw material prices fluctuate, and the risk of dilution is determined to increase.