Event: Company releases 2024 quarterly report
The first quarterly report exceeded expectations, and product structure optimization improved profitability: the company's revenue for the first quarter of 2024 was 19.9%, net profit to mother was 380 million yuan, up 257.5% year on year, net profit after deducting non-return to mother was 280 million yuan, up 1723% year on year, net cash flow from operating activities was 1.53 billion yuan, up 1043% year on year, and performance exceeded expectations. The reason for the decline in the company's revenue in the first quarter was mainly due to a customer's game console project entering the latter stage of the product cycle (peak delivery period in the same period last year), which affected the revenue of the smart hardware business segment, and products from major customers such as precision components, intelligent acoustics, and smart hardware, such as XR glasses and smart wearables, progressed smoothly, contributing to the company's incremental revenue in the first quarter. The company's gross margin and net margin for the first quarter were 9.2%/1.9% respectively (7.0%/0.5% for the same period last year, respectively). On the one hand, the net profit margin for a single quarter hit a new high in nearly a year and a half. On the one hand, shipments from XR eyewear customers with higher gross margins and major TWS headphone customers resumed growth (the declining gross margin of the game console business was low), and on the other hand, the company continued to improve profit quality through effective cost control capabilities. Steady financial indicators and efficient internal operations continued the trend of continuous upward profitability since the second half of last year . We believe that the inflection point of the company's performance has been consolidated. With the continuous consolidation of core competitiveness, continuous breakthroughs in key customer projects, and a recovery in demand for various types of smart hardware, the company is expected to maintain a high growth trend in the future.
The XR glasses business is expected to resume high growth: the company maintains its leading position in comprehensive solutions for XR glasses in the world, leading the industry from optical components (VR), optoelectronic systems (AR), core algorithms, to intelligent machine design and manufacturing capabilities, and has long-term in-depth cooperation with major global technology companies. 1) From a short-term perspective, the iterative upgrading of new products and market development for major VR eyewear customers this year is expected to drive a significant increase in shipments; 2) In the era of spatial computing, VR/AR/MR hardware shipments are expected to open up a growth ceiling in the next few years, based on various factors such as the expansion of application scenarios, the improvement of the software and hardware ecosystem, and the entry of more technology giants, and Goertek is expected to continue to lead the development of the industry with its position as a global core supplier.
Product structure optimization, all kinds of intelligent hardware are expected to fully recover: the company adheres to intelligent manufacturing+precision manufacturing two-wheel drive and builds an industrial ecosystem around the “4+4+n” zero-integration strategy. With the recovery in shipments of various terminal products and the optimization of the product structure, the company's profitability is expected to continue to improve. 1) TWS headphone design and core acoustic components occupy a leading position in the market, and major customer orders and shares are expected to rise steadily. At the same time, product iteration is also expected to help the revenue and profit margin of intelligent acoustic machines increase steadily; 2) Smart hardware such as game consoles, wearables, and smart homes is expected to flourish, and diversification of customers and product types will effectively increase the gross margin level of smart hardware; 3) The company continues to strengthen its layout in the field of microelectronics. MEMS microphones are leading the world, and investment in MEMS smart sensors and SiP advanced packaging processes is increasing At the same time as flexible performance, it is expected to increase the profit margin of the complete machine business.
Profit forecast and investment rating: We maintain the company's 2024-2026 net profit forecast of 23/34/4.5 billion yuan, corresponding to PE of 22/15/11 times, respectively, and maintain a “buy” rating.
Risk warning: The development of the VR/AR industry falls short of expectations, and sales of other products fall short of expectations.