Description of the event
On April 19, 2024, Lexin Technology announced the “Report for the First Quarter of 2024”. With 2024Q1, the company achieved operating income of 387 million yuan, +21.71% year over year, net profit of 54 million yuan, +73.43% year over year; realized net profit of 48 million yuan without deduction to mother, +88.56% year over year.
Incident comments
Sales growth is driven by the release of sub-new products. With 2024Q1, the company achieved operating income of 387 million yuan, +21.71% year over year, achieving net profit of 54 million yuan and +73.43% year over year; achieving net profit without return to mother of 0.48 million yuan, +88.56% year over year; the new cost-effective product lines ESP32-C3, ESP32-C2 and ESP32-S3, a high performance product line, maintained rapid growth. The rich product matrix met a wide range of customer application needs, and the company achieved year-on-year revenue growth; the cost growth rate was lower than the revenue growth rate, which helped the company achieve high net profit in the first quarter increase. In terms of gross margin, the 2024Q1 company's comprehensive gross margin was 41.93%, +1.22pct year over year. Among them, the gross margins of chips and modules were 47.10%, 38.06% year over year, -1.26pct and +1.32pct, respectively; structural changes that increased the revenue share of high-margin chips helped increase the company's overall gross margin year-on-year, higher than the company's default gross margin target of 40%. On the R&D side, the company adheres to the strategy of self-research on core technology and investing heavily in research and development of underlying technologies. The 2024Q1 R&D cost was 104 million yuan, +21.48% over the same period last year.
Starting from a WiFi MCU and growing to a Wireless SoC, the product matrix built the company's core competitiveness. Lexin Technology continues to develop the product layout in the direction of “processing+connection”. The company has now launched 11 different chip product lines. Self-developed 32-bit processors based on the RISC-V architecture have achieved main frequencies from single-core 96MHz to dual-core 400MHz. Connectivity already includes Wi-Fi, Bluetooth, Thread, and Zigbee technologies. After covering Wi-Fi 4, Wi-Fi 5, and Wi-Fi 6 technologies, it is currently developing 6GHz Wi-Fi 6E protocol-related products. In the smart home and consumer electronics sector, the company has achieved a high penetration rate for products that require short-range wireless connectivity. The company continues to increase the layout of edge-side AI capabilities, and its ESP32-S3 can achieve high-performance applications such as image recognition, voice wake-up and recognition, and demand in the LCD screen related applications and AI voice control markets has shown significant growth; the ESP32-P4 product line integrates an H264 encoder and is equipped with AI expansion instructions to better support HMI applications. It is the company's first SoC without wireless connectivity to break through the communication+IoT market and enter the multimedia market. It can meet the needs of customers with high requirements for edge computing capabilities.
With the collaborative development of software and hardware, the long-term growth trend of leading IoT communication chips has not changed. With the rapid development of the IoT industry, the improvement of Lexin Technology's own technical capabilities and continuous improvement of products in the direction of high performance and cost performance have helped the company's product application scenarios and the number of downstream customers continue to increase, laying a firm foundation for the company's steady development in the medium to long term.
Net profit due to mother for 2024-2026 is estimated to be $1.86/22/341 million yuan, respectively, maintaining a “buy” rating.
Risk warning
1. There is uncertainty about mass production of new products;
2. There is uncertainty in the electronic terminal consumer market.