Incident: Jingjiawei released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 713 million yuan, yoy -38.19%; net profit to mother of 60 million yuan, yoy -79.35%; comprehensive gross profit margin of 60.32% for the whole year, a year-on-year decrease of 4.68pct. Among them, the company achieved revenue of 244 million yuan, yoy -42.53%, qoq +96.67% in a single quarter; net profit to mother of 44 million yuan, yoy -61.93%, qoq +89.80%; and a consolidated gross profit margin of 59.32%, a year-on-year decrease of 6.02 pcts, an increase of 2.50 pcts over the previous quarter. 2024Q1 achieved revenue of 108 million yuan, yoy +66.27%, qoq -55.60%; net profit to mother of -12 million yuan, yoy +83.68%; gross profit margin of 62.91% in a single quarter, an increase of 5.19 pcts year-on-year, and 3.59 pcts month-on-month.
Practice internal skills: continuous investment in R&D expenses. In 2023, the company invested 331 million yuan in R&D, an increase of 6.03% over the previous year, with a R&D expenditure rate of 46.44%; 2024Q1 spent 70 million yuan on R&D, with a R&D expenditure rate of 64.85%. Supported by a high R&D cost rate, the company successfully developed the “Jinghong” series of high-performance intelligent computing modules and complete machine products in 2024, filling the company's product gaps in the fields of AI training, AI reasoning and scientific computing. We believe that at a stage where the external environment is relatively uncertain, the company maintained an increase in R&D expenses while revenue declined year-on-year in 2023. On the one hand, it highlights the company's technology-first business philosophy, and also shows the company's determination to be optimistic about the future development of the industry.
“Jing Hong” + “JM”, AI and graphics fight with both fists. On March 12, Jingjiawei announced that the company has successfully developed the “Jinghong” series of high-performance intelligent computing modules and complete machine products for application fields such as AI training, AI reasoning, and scientific computing, and will be promoted to the market as soon as possible. Jingjiawei's JM series products mainly involve graphics processing. They have experienced iterations of the 5/7/9 series, and each version has segmented products suitable for different scenarios. Among them, the JM9-1 and JM9-2 products both have 8GB of video memory capacity, and the video memory bandwidth is 128GB/s and 25.6Gb/s, respectively. We believe that as a leading domestic GPU company, Jingjiawei has enriched its product line by releasing its first computing power product for the AI field. While increasing the company's overall competitiveness, the AI series products are expected to become a new driving force for the company's performance growth in the future.
The “Jinghong” series has strong compatibility, and multi-card interconnection can expand computing power. According to the company announcement, the “Jinghong” series products support mixed precision computation such as INT8, FP16, FP32, FP64, etc., support new multi-card interconnection technology to expand computing power, and are compatible with mainstream domestic and foreign CPU, operating system and server vendors. They can support the current mainstream computing ecosystem, deep learning frameworks and algorithm model libraries, and greatly shorten the user adaptation verification cycle. At the same time, the computational demand for AI and high-efficiency computing is increasing. Under the training requirements of large-scale LLM models, there are also higher requirements for GPU performance and connection speed. The “Jinghong” series products will support new multi-card interconnected computing, thus expanding computing power.
Profit forecasting and investment advice. We expect Jingjiawei's 2024E/2025E/2026E to achieve operating income of 12.1/15.5/2.0 billion yuan and net profit to mother of 3.0/4.0/5.1 billion yuan, respectively. The PS valuation corresponding to the current stock price is 25.3/19.7/15.3x, respectively, maintaining the “Highly Recommended” rating.
Risk warning: Order fulfillment progress falls short of expectations, new product development falls short of expectations, downstream demand falls short of expectations.