Net profit from 24Q1 fell 178.41% year on year. Maintaining the “buy” rating, Zhenlei Technology released a quarterly report. The first quarter of 2024 achieved revenue of 54 million yuan (yoy +29.30%, qoq -51.17%), and net profit to mother of 5.6772 million yuan (yoy -178.41%, qoq -117.45%). Judging from historical data, the company's revenue and profit in the first quarter accounted for a low share of the whole year, and there are limited references to the company's annual performance. Therefore, we maintain profit forecasts. The company's 2024-2026 EPS is expected to be 0.81, 1.26, and 1.70 yuan, respectively. Comparatively, the company Wind agreed to expect an average PE value of 74 times in 24, giving the company 74 times PE in 24 years, with a target price of 59.94 yuan (previous value of 60.75 yuan), maintaining a “buy” rating.

Gross margin remained high. High R&D investment and impairment losses reduced the company's 24Q1 business scale continued to expand. Operating revenue grew steadily year on year. The gross margin level was 87.56%, a decrease of 0.79 pct year on year, and remained high. The 2024Q1 company's cost ratio for the period was 74.97%, up 17.80 pct year on year, of which the sales expense ratio was 7.35%, a year-on-year decrease of 0.21pct; the management expense ratio was 18.54%, a year-on-year decrease of 0.17pct; the R&D expense ratio was 67.79%, up 13.07pct year on year. The R&D investment amount was 36.51 million yuan, an increase of 60.18% year on year, and high-intensity R&D investment reduced profit margins. At the same time, credit impairment losses of 7.9 million yuan were calculated, an increase of 179.41% over the previous year, which also had an impact on profits. 24Q1 Company's accounts receivable and notes amounted to $389 million, up 1.50% from the end of the previous year, with little change.

Repayments have increased significantly, and net operating cash flow has declined

The 24Q1 company received 45.5 million yuan in cash from sales of goods and services, up 34.66% year-on-year from 23Q1, but net operating cash flow was -43.81 million yuan, a level of -29.04 million yuan for the same period last year. This was mainly due to an increase in cash payments made to and to employees for the purchase of goods and services, and other cash payments related to business activities. Currently, the company's monetary capital is 1,518 billion yuan, down 4.71% from the end of 23, and is still fully funded.

The product lineage continues to improve, opening up room for long-term growth

Since its launch, the company has continued to be deeply involved in the field of analog chips, launched various new products in all four major business lines, and continues to target the high-end field to fill the domestic technical gap. The company is gradually transforming from a startup that solves the problem of a single product problem to a department store with high-end analog chips for communications/radar. In '23, the company made major breakthroughs in microsystems and module products, AD/DA, etc., targeting high-end products in emerging application scenarios such as low-orbit commercial satellites and digital phased array radars to seize subsequent market development dividends. The company's continuous high-intensity R&D is expected to further broaden the product spectrum, laying a solid foundation for subsequent medium- to long-term development.

Risk warning: Risk of orders falling short of expectations, risk of falling product prices.