Incidents:
The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 2.123 billion yuan, a year-on-year increase of 17.11%, net profit to mother of 188 million yuan, an increase of 33.78% year-on-year, and net profit after deducting non-return to mother of 174 million yuan, an increase of 27.35% year-on-year.
1. Maintain steady revenue growth and improve profitability
The company achieved a steady increase in revenue in the first quarter of '24, and showed a recovery after the year-on-year pressure in 23Q4. At the same time, the company achieved rapid growth on the profit side, mainly due to improvements in profitability, achieving a net interest rate of 8.96% in 24Q1. We expect the company to continue to maintain a steady increase in profitability.
2. AI PCs are expected to become a development trend, enabling laptop module sales to grow. In CES 2024, major manufacturers launched AI PCs. For example, Lenovo released more than 10 new AI PC products at CES, including Asus ROG, HP, etc., which also launched AI PC products. Additionally, Microsoft plans to change the Windows keyboard layout and add a Copilot key to wake up the AI assistant. This button has already started appearing on the new CES2024 AI PC. We believe that AI PCs are expected to become an important popular terminal product under the AI wave, and the launch of AI PCs may enable sales growth in high-end notebook sales and drive an increase in laptop communication module sales.
3. The development trend of edge computing power, and intelligent modules as carriers
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). Through edge computing models, algorithms can run locally on edge servers or gateways, and even on smartphones. As an edge-side product integrating computing power and communication functions, intelligent modules have become a new carrier for edge computing needs, and have been used in various fields such as vehicles and consumption. In 2023, the company launched the SC151-GL smart module and the SC228 smart module to empower industries such as intelligent logistics terminals, wireless intelligent payments, drones, and intelligent robots.
4. Looking forward to the future, the company lays out a high-quality track, rich product layout, and the industry continues to be booming & share expansion is strong: 1) On the product side, the company has launched a variety of new products, obtained multiple product certifications, and launched 5G smart modules and full-platform 5G/LTE series modules adapted to shared two-wheelers to continue to enrich product categories; 2) Market-side, ① The PC sector is expected to continue to increase. Guanghetong's first-mover/market advantage+5G products continue to expand priority card positions at home and abroad; ② The automotive sector continues to expand domestic and foreign markets through Rui Ling Guang+Yuanchi Yuanchi Yuanchi, At the same time, we are improving Ruiling's wireless business situation and continuing to expand new customers, and we can expect high growth in the future; ③ By vigorously expanding overseas markets, products such as gateways and Cat1 are expected to continue to experience high volume growth. 3) Edge computing power brings a new direction of development. In the AI era, edge computing is a development trend, and module manufacturers are expected to benefit.
Profit forecast and investment advice: Due to the company's 24Q1 profitability recovery and steady revenue growth, the adjusted 24-25 net profit forecast was 7.4/9.4/1.15 billion yuan (previous value was 70/8.5/1.02 billion yuan), corresponding to the 24-26 valuation 18/14/12 times, maintaining the “buy” rating.
Risk warning: Fierce competition in the industry affects profitability, downstream expansion progress falls short of expectations, risks in the overseas macro environment