Key points of investment
Event: On April 23, 2024, the company released its annual report for 2023 and the first quarter of 2024. In 2023, the company achieved operating income of 13.861 billion yuan, a year-on-year decrease of 2.59%, and realized net profit to mother of 907.061 million yuan, a year-on-year decrease of 85.43%. In the first quarter of 2024, the company achieved operating income of 3,954 billion yuan, an increase of 26.06% over the previous year, and achieved net profit of 547.66 million yuan to mother.
Market demand is picking up, and R&D investment continues to be increased. The company's main business is engaged in the design, R&D, production and sales services of wireless communication modules and solutions in the Internet of Things field, and provides one-stop solutions such as wireless communication modules, antennas and software platform services. In 2023, the company achieved operating income of 13.861 billion yuan, a year-on-year decrease of 2.59%, realized net profit of 907.061 million yuan, a year-on-year decrease of 85.43%, realized deducted non-net profit of 5.6691 million yuan, a year-on-year decrease of 98.82%, total assets of 11.233 billion yuan, an increase of 9.34% year-on-year, and a gross profit margin of 18.94%.
Demand from the downstream market gradually recovered, and the company's profitability improved. The revenue for the first to fourth quarters was 3.137 billion yuan, 3.375 billion yuan, 3.455 billion yuan, and 3.894 billion yuan, respectively. Revenue continued to improve from quarter to quarter.
In the first quarter of 2024, the company achieved operating income of 3,954 billion yuan, an increase of 26.06% over the previous year, achieved net profit of 54.766 million yuan to mother, and realized deduction of 51.3389 million yuan in non-net profit. In 2023, the company invested 1.604 billion yuan in R&D, accounting for 11.57% of revenue, an increase of 20.19% over the previous year. The company had 4,158 R&D technicians, accounting for 74.00%, and obtained 433 authorized patents, 298 trademarks, and 269 software copyrights.
Enrich the module product matrix and break through the global automotive business. The company is the world's leading supplier of integrated IoT solutions, and has products such as 5G modules, smart modules, LTE modules, short range modules, satellite communication modules, LPWA modules, and in-vehicle modules. In 2023, the company developed various RG650x series/RG255x series 5G communication modules and solutions to improve network coverage and transmission efficiency; launched the SG885G-WF, a next-generation flagship Android smart module, used in video conferencing systems, live streaming terminals, gaming equipment, computing terminals, robots, drones, AR/VR, smart retail and security; to provide customers with AIBox overall solutions to achieve edge-side applications of intelligent algorithms in various scenarios; launched the LTE Cat 1 module EG916Q The global version, Ex800G, EC800K, EC801E, EC800Z, EG800P, and EC200A-CNV1 series, pioneered new industry applications and market requirements and enhanced industry competitiveness; launched a variety of WI-FI 7 modules, one-stop Matter solutions, Bluetooth modules supporting BLE and Mesh technology, Wi-Fi HaLow modules, and sub-GHz series modules for customers in the fields of consumer electronics, smart meters, smart cities, smart homes, industrial IoT, etc. Provide a variety of wireless connectivity solutions. In the process of expanding the global automotive market, the company thoroughly understands and explores customer needs and pain points, and is strengthening the implementation of multiple product matrices such as automotive intelligent modules, Wi-Fi & BT modules, GNSS positioning modules, UWB modules, and automotive antennas. Recently, the company received a fixed letter from a world-renowned auto parts supplier with a sales amount and selected the company as its automotive module supplier. The project is expected to gradually begin mass production and delivery in 2026. The delivery period is 2026 to 2033, for a total of 8 years, and the total sales amount is estimated at about US$742 million to US$1,309 million.
The IoT industry is breaking through the waves and laying out a multi-sector pattern. The company aims to provide customers with comprehensive IoT solutions. The antenna layout, ODM business, etc. are growing well, and businesses such as industrial intelligence, agricultural intelligence, intelligent solutions, and certification testing services will become a new growth engine for the company's development in the future. Antennas continue to make breakthroughs in various industries. The high-end antenna solutions developed cover the Internet of Things with different technologies such as 5G, LTE, Cat M, LPWA, GNSS, Wi-Fi & BT. The products have been widely used in various fields such as smart meters, two-wheelers, smart industry, power industry, drones, smart homes, etc., and have received a number of world-renowned top brand projects. The ODM business provides PCBA solutions for leading customers in the PDA, POS payment, FWA, two-wheel intelligent travel, BMS, AIoT and other industries. The company began deploying IoT platforms and software solutions in 2019, and has now served more than 500 customers. We independently developed the QIDI (QuecteLInTelligent Defect Inspection) intelligent defect inspection platform and Qvision, an algorithm model visualization deployment tool, which greatly reduced the threshold for learning and using algorithms in the field of industrial manufacturing. In 2023, the company provided more than 100 customers with various certification services such as global regulatory certification, operator certification, compliance certification, and other industry certifications. In total, it has provided excellent certification services to more than 300 customers around the world, helping customers overcome entry barriers in the international market and achieve international expansion.
Investment advice: The company is deeply involved in IoT modules in the automotive field, and also lays out high-computing power modules. Considering the gradual increase in the company's 5G module shipments and the increase in competitive pressure after the increase in shipments and adjusting the company's profit forecast, we believe that in the future the company will maintain a high growth rate for a long time, predicting the company's 2024-2026 revenue of 177.84/217.14/26.426 billion yuan, up 28.3%/22.1%/21.7% year on year. The company's net profit to mother was 4.92/6.53/844 billion yuan, respectively, up 442.6%/32.7%/29.3% year on year, corresponding to EPS1.86/ 2.47/3.19 yuan, PE 21.5/16.2/12.5, maintaining the “gain” rating.
Risk warning: New product introduction falls short of expectations; market competition continues to intensify; overseas market expansion is unfavorable; automotive module orders fall short of expectations.