Report summary

Deeply involved in the field of IoT terminals and data storage, the performance returned to high growth. The company is committed to providing cloud-edge-end intelligent device services around the audio and video ecosystem with cloud platforms and AIoT as the core, forming two major product lines: intelligent IoT devices and storage devices. The company has established long-term and stable cooperative relationships with well-known domestic and foreign technology companies and e-commerce companies such as Lenovo Group, Anke Innovation, Xiaomi ecosystem enterprises, China Mobile Group, 360 Group, NetEase Youdao, Ring (US), Noise (India), 3-Plus (US), LG (South Korea), Buffalo (Japan), and Wolan. According to the company's performance forecast, net profit for the full year of 2023 will reach the range of 275-310 million yuan, +110.07%-136.81% year-on-year.

Storage returns to a growth cycle, and AI brings new opportunities for development. Thanks to production cuts from leading upstream suppliers and recovery in the consumer electronics market, the overall price of memory chips showed an upward trend. According to TrendForce forecasts, 2024Q1, DRAM contract prices will increase by 13%-18%, and NAND Flash contracts will increase by 18-23%. At the same time, with the rapid growth of AI servers and AIPC shipments, the demand for storage has increased dramatically. The company has a complete product line on the SSD product side, and long-term in-depth cooperation with Lenovo is expected to benefit from the advancement of Lenovo AIPC strategy and usher in a sharp rise in the volume and price of storage products.

With the layout of multi-category IoT terminals, the cloud video ecosystem is gradually improving. The global IoT market is growing rapidly. According to IoT Analytics, the number of global IoT connections grew 18% in 2022 to reach 14.3 billion. It is expected to reach 16.7 billion by 2024, an increase of 15% over the previous year. The company's IoT terminal products cover many core categories such as smart cameras, sweeping robots, and wearable devices, and many single products rank high in overseas markets. At the same time, the company continued to advance the cloud-edge-end integration strategy by increasing capital to Xi'an Sihua, a leading domestic cloud video solution, to build an independent cloud platform. The number of devices and users connected to the company's video cloud platform continues to grow, and has now generated a small amount of revenue. Among them, the number of online users of the smart camera cloud business has reached the level of one million.

Investment advice: The company's revenue for 2023-2025 is estimated to be RMB 43.06/59.6/ RMB 7.459 billion, respectively, and net profit to mother of RMB 3.01/5.74/746 billion, respectively. First coverage, giving a “buy” rating.

Risk warning: Server business development falls short of expectations, cloud platform ecosystem development falls short of expectations, risk of exchange rate fluctuations, risk of raw material price fluctuations.