Event: the company recently released a report for the third quarter of 2023 that revenue in the first three quarters of 2023 was 1.844 billion yuan, YoY+16.49%; net profit was-426 million yuan, YoY-129.10%; deducted non-return net profit was-535 million yuan, YoY-101.79%; gross profit margin was 24.66%, down 12.49 pct from the same period last year. The decline in gross profit margin is mainly due to the continuous inventory adjustment of the semiconductor industry chain and the intensification of market competition. The revenue side of the company as a whole achieved rapid growth in the first three quarters.

Comments: 23Q3 single-quarter revenue hit a record high, losses are narrowing compared with the same period last year. The company's 2023Q3 achieved revenue of 787 million yuan in a single quarter, and the revenue growth rate of YoY+56.57%, has increased rapidly quarter by quarter since this year, and the revenue scale of 23Q3 has reached a record high; on the profit side, the net profit is-90 million yuan, which is significantly narrower than the loss of-98 million yuan of 22Q3 and-140 million yuan of 23Q2; gross profit margin is 24.72%, down 13.07pct from the same period last year. On the expense side, in the first three quarters of 2023, the company's sales expenses were 25 million yuan, YoY+16.61%; management expenses were 103 million yuan, YoY+15.55%; financial expenses were-43 million yuan, YoY+5.90%; R & D expenses were 851 million yuan, and YoY+14.73%, R & D expenses accounted for 46.17% of revenue, a decrease of 0.71pct compared with the same period last year.

Equity incentive shows the confidence of management in the future, and the fund-raising projects are adjusted and put into the wearable market. Recently, the company issued a restricted equity incentive plan for 1021 people, including the director of research and development, with a total of 9.5 million shares and a grant price of 21.50 yuan per share. the assessment goal is to take the 2022 operating income as the base, and the revenue growth rate of 2023 2024amp will not be less than 35%, 60% and 90% in 2025. This equity incentive plan will help the company to attract and retain talents in the fierce market competition environment, and enhance team cohesion and core competitiveness. In addition, the company issued a change investment project announcement, the remaining 169 million of the IPO "Intelligent IPC Chip Design Project" to invest in the "new generation of intelligent wearable device software and hardware platform development project", the project construction cycle is from October 2023 to September 2026, and mass production is expected to be achieved by September 2026. The main reasons are the weakening of the policy drive in the field of IPC chips, the difficulty of the company as a new entrant, and the intensification of competition and the decline of gross profit. Wearable chips have been widely used in smartwatch brands such as Shu Lang, Philips, XIAOMI, Amazfit and other smartwatch brands. The project company aims to develop 1-2 compact baseband RF integrated chips, which will enrich and upgrade the existing product lines and help to further enhance product value and core competitiveness.

Profit forecast and investment advice: Aojie Technology is China's leading manufacturer of cellular Internet of things baseband chips, which is optimistic that the company will continue to expand product categories, expand downstream customers and achieve rapid performance growth by virtue of its independent core technical strength. It is estimated that from 2023 to 2025, the company will achieve operating income of 27.55 million yuan, net profit of 2.34 billion yuan, and "overweight" rating of 0.13 yuan, corresponding to EPS-1.04 pound, respectively.

Risk tips: increased competition in the industry, chip expansion is not as expected.