Incidents:
The company released its 2023 three-quarter report. The first three quarters achieved revenue of 1,560 billion yuan, a year-on-year decrease of 13.34%, and net profit of 68.66 million yuan, a year-on-year decrease of 43.91%.
Demand for the Internet of Things is weak, and operations are under pressure
Affected by weak overall industry demand, the company's operations were under pressure in the first three quarters. In Q3 alone, the company achieved operating income of 537 million yuan, a year-on-year decrease of 20.60%, and net profit of 2001 million yuan, a year-on-year decline of 44.73%. In terms of profitability, the gross margin for the Q3 quarter fell 1.69pct month-on-month to 17.05%, while net profit margin also fell to 3.69%. We expect the overall recovery of the Internet of Things sector and the rapid growth in demand in the automotive & FWA sector to drive up the company's operations.
The automotive market joins hands with major customers to empower 5G intelligent connectivity:
The company's products are used in the fields of intelligent cockpit, T-box, ADAS\ DMS, assisted driving, and on-board monitoring. Connect with BYD, a major customer, to continue to empower rapid growth. The company's 5G smart module products are used on a large scale in BYD's DiLink 4.0 and DiLink 5.0 5G intelligent networking systems, providing stable and high-speed 5G network connections and an intelligent cockpit experience based on Android systems for new energy vehicles such as BYD Dynasty Network, Ocean Network, and Tension.
Build a 5G-A FWA solution to enable the interconnection of everything
Is MegaSmart based on the latest Snapdragon? The X75 platform officially released the 5G CPE solution in mid-March this year. Thereafter, it is expected that the SRM827W 5G-A module supporting 5G millimeter waves will be released in Q4. At the same time, the 5G-A MiFi solution SRT873 and the 5G-A ODU solution SRT853MX based on this module design will be released at the same time. The company continues to enrich 5G millimeter wave terminals and applications, so that 5G can truly benefit thousands of industries.
Edge computing power opens up vast space for long-term growth
Looking at future development, edge computing power is indeed expected to become an important form of AI computing power development (faster processing and storage of data to achieve more efficient real-time applications critical to companies). Applications such as virtual and augmented reality (VR/AR), driverless cars, smart cities, and even building automation systems all require this level of rapid processing and response.
MeiGe Smart's high-computing power AI module products are specially designed for terminal-side and edge-side AI applications, covering entry-level, mid-range, and flagship multi-level products. Currently, the SNM920, SNM930, SNM950, SNM960, and SNM970 series are on the market. The corresponding AI computing power covers 0.2T to 48T, bringing a comprehensive experience of high-quality connectivity, low power consumption, and high-performance edge computing power. Among them, the SNM970 product has a comprehensive AI computing power of up to 48TOps. At the same time, the company's product team has successfully run Wenshengtu's large model Stable Diffusion on the SNM970 module. This is also the first example in the industry of running a large inference model on a high-power AI module. With 5G+AIoT technology as the core, MeiGe Intelligence is deeply involved in partner application scenarios, helps IoT terminals innovate and upgrade, and becomes the foundation for the digital transformation of enterprises.
Profit forecast and investment advice: Affected by weak sector demand, we adjusted the company's net profit from 23-24 to 11/160 million yuan (previous value was 29/4.1 billion yuan). The company's net profit for the year 25 is estimated to be 210 million yuan, corresponding to the current PE valuation for 23-25, 63/44/34 times, maintaining the “increase in holdings” rating.
Risk warning: increased industry competition, risk of raw material price increase, risk of continued weakening industry demand, risk of unfavorable company expansion of new customers, etc.