Core views:
Profit increased year over year in 24Q1. The company publishes its 2023 annual report and 2024 quarterly report. 24Q1 achieved revenue of 387 million yuan, +21.71% year over month, -4.66% month on month; net profit to mother of 53.92 million yuan, +73.43% year on year, +9.95% month on month; net profit after deducting non-return to mother of 47.91 million yuan +88.56% year on year, +17.69% month on month. Compared with 23Q1, new and old customer businesses all contributed to growth. The next-generation cost-effective product lines ESP32-C3 and ESP32-C2 and the high-performance product line ESP32-S3 are all in a phase of rapid growth. The expanded product matrix can meet a wider range of customer application requirements. In terms of expenses, administrative expenses and sales expenses have been clearly controlled. The number of the company's core R&D team is relatively stable, and the increase in R&D expenses is also lower than the revenue growth rate.
The chip business increased its share of revenue, and the overall gross margin increased. According to product classification, 24Q1 chip revenue was 165 million yuan, accounting for 42.7%, and module revenue was 219 million yuan, accounting for 56.7%, compared with 34.2% and 64.6% for the same period last year. The gross margins of the 24Q1 chip and module business were 47.1% and 38.1%, respectively. Chip customers mainly used RMB pricing, while costs were mainly in US dollars. The appreciation of the US dollar also put pressure on chip gross margins. Excluding exchange rate factors, the gross margin of the company's various operations remained stable. Meanwhile, the increase in the share of the chip business also led to a year-on-year increase in 1Q24 comprehensive gross margin to 41.93%.
The next category of products is expected to provide a major growth engine. The company continues to innovate, continue to give products strong cost performance and differentiation, and has now formed a relatively complete product matrix. According to the investor relations activity records disclosed by the company, the new product ESP32-C3/C2/S3 is currently in a stage of rapid growth. The company expects the new product ESP32-H2 to be launched at 24H2 and enter a period of high growth next year; ESP32-C6 will enter a period of high growth this year, and will be included in the next new category of products next year.
Profit forecasting and investment advice. The company is expected to achieve EPS of 2.37, 3.35, and 4.71 yuan/share in 24-26, respectively. Considering the company's long-term competitive advantage and comparable company valuation, the company is given a 24-year 55 times PE valuation, corresponding to a reasonable value of 130.30 yuan/share, and a “buy” rating.
Risk warning. The volume of new products fell short of expectations; industry competition intensified; demand recovery fell short of expectations.