The company predicts a 32%-37% year-on-year increase in 1Q24 profit
The company released 1Q24 performance forecast. The company expects to achieve operating income of 11.4-1.18 billion yuan, a year-on-year increase of 28%-33%; achieve net profit of 566-580 million yuan, an increase of 32%-37%; and achieve net profit without deduction of 51-53 billion yuan, an increase of 47%-52% over the previous year. The performance exceeded our previous expectations. We believe that the main benefits are: 1) the base for the same period in 2023; 2) the overall inventory level of dealers has been digested to a reasonable level, sending a signal that downstream demand is bottoming out; 3) the conference products and cloud office terminal business is growing rapidly, and the competitiveness of the new business growth curve continues to improve.
Key points of interest
New businesses are growing rapidly, and the ability to drive performance is gradually showing --
A desk phone terminal. We believe that the 2023 results were mainly affected by desk-phone terminal inventory removal. Since 1Q23, the company's revenue growth rates in the 1Q-4Q quarter of 2023 were -15%, -11%, -3%, and -9%, respectively. 1Q24 revenue increased +30% year over year (median), reflecting the recovery trend of downstream demand. We believe that in 2024, Yilian's downstream dealers are expected to move from the “inventory digestion” stage to the “reasonable inventory replenishment” stage to support the growth of the company's product sales.
Conference products. The company's conference products empower various industries, including medical care (remote surgery teaching systems have been deployed in a hospital), transportation (road and railway solutions help the Lanzhou Railway Administration), government (one-stop video solutions to help the Shanxi Provincial Committee), and industry (selected as the first batch of next-generation information technology typical cases of the Ministry of Industry and Information Technology). We believe that they reflect the company's strong product technology. In April, the company and Microsoft announced a partnership to launch an MDEP program to enhance data security. We have seen further deepening cooperation between the company and Microsoft. We believe that with the expansion of the product matrix and the pace of new products, the revenue in this sector is expected to grow further in 2024.
Cloud office terminal. In March, the company announced the launch of the BH70 Bluetooth headset, which improved noise reduction performance and wearing comfort. Looking ahead to 2024, we believe that positive feedback from channels can be transformed into positive feedback from end customers, driving the pace of headset promotion on the right track. Furthermore, we expect that in 2024, the company is expected to increase its efforts to develop the cloud office terminal business, accelerate the pace of product promotion, and drive rapid growth in the scale of business revenue.
Profit forecasting and valuation
We have generally kept our 2023 profit forecast unchanged. Considering the recovery in the company's downstream demand and the rapid growth of new business, we raised our 2024-25 profit forecast by 7% and 8% to 24.0 billion yuan or 2.80 billion yuan. The company's current stock price is 16.0, 13.7 times P/E for 2024 and 2025. We raised the company's target price by 7% to RMB 38 based on the 2024 P/E ratio of 20 times. We maintain our outperforming industry rating, and our target price still has 25% upside compared to the current stock price.
risks
Overseas macroeconomic uncertainty, new business sales falling short of expectations, exchange rate risk.