Incidents:
The company publishes the 2023 Annual Report and the 2024 Quarterly Report. In 2023, it achieved operating income of 2,147 billion yuan, a year-on-year decrease of 6.88%; realized net profit to mother of 64.51 million yuan, a year-on-year decrease of 49.54%. In 2024Q1, we achieved revenue of 574 million yuan, an increase of 29.65% year on year; realized net profit of 6.47 million yuan to mother, a year-on-year decrease of 64.33%.
Demand in the sector is expected to reverse. Overseas recovery in Q1, revenue returned to rapid growth, and the company's revenue in '23 was under pressure, mainly due to a decline in domestic revenue. By region, the company's overseas revenue in '23 was 656 million yuan (yoy +20.27%), and domestic revenue was 1,491 billion yuan (yoy -15.28%).
In 24Q1, the company's overall revenue returned to rapid growth. The revenue trend continued to improve, overseas revenue growth accelerated, and domestic revenue returned to a growth trajectory. Among them, overseas revenue was 226 million yuan, an increase of 53.74% over the same period last year of 147 million yuan, and the share of revenue increased to 39.37%. Domestic revenue was 348 million yuan, up 17.57% from 296 million yuan in the same period last year. We believe that demand for IoT modules is expected to reverse and maintain rapid growth again. The company's layout of intelligent connected vehicles, overseas high-end IoT markets, high-computing power modules, and generative AI applications is expected to enable the company to continue to grow rapidly.
24Q1 profitability is under pressure in the short term, and a recovery is expected
The 24Q1 company achieved a gross margin of 15.69% and a gross margin of 18.90% in Q4 in '23, down 3.21 percentage points from month to month. The main reasons are: 1. The impact of the shipping structure: some products with low gross profit levels were shipped centrally within 24Q1, reducing the overall gross margin level in stages; 2. Shipments of products related to intelligent connected vehicles increased, and gross margin decreased compared to the same period last year.
Edge computing power opens up broad space for long-term growth
Judging from future development, edge computing power is indeed expected to become an important form of AI computing power development (processing and storing data faster to achieve more efficient real-time applications critical to the company). Applications such as virtual and augmented reality (VR/AR), driverless cars, smart cities, and even building automation systems require this level of rapid processing and response.
MeiG's intelligent high-computing power AI module products are specially designed for terminal-side and edge-side AI applications, covering entry-level, mid-range, and flagship multi-level products. Currently, SNM920, SNM930, SNM950, SNM960, and SNM970 series are on the market. The corresponding AI computing power covers 0.2T to 48T, bringing a comprehensive experience of high-quality connectivity and low power consumption and high-performance edge computing power. Among them, the SNM970 product has a comprehensive AI computing power of up to 48 tops. At the same time, the company's product team has successfully run Stable Diffusion, the large Wenshengtu model, on the SNM970 module. This is also the first example in the industry of running a large inference model on a high-computing power AI module. With 5G+AIoT technology as the core, MeiG Intelligence is deeply involved in partner application scenarios, helps innovate and upgrade IoT terminals, and has become the founder of the digital intelligence transformation of enterprises.
Profit forecast and investment advice: Affected by the decline in overall profitability in Q1, we adjusted the company's net profit from 24-25 to 100.140 million yuan (previous value was 1.6/210 million yuan). The company's net profit for 26 is estimated to be 200 million yuan, corresponding to the current 24-26 PE valuation of 58/40/29 times, maintaining the “increase” rating.
Risk warning: risk of business development falling short of expectations, risk of demand recovery falling short of expectations, risk of declining profitability due to intense competition