occurrences
The company released its 2024 quarterly report. 2024Q1 achieved operating income of 387 million yuan, up 21.71% year on year, down 4.66% month on month; realized net profit of 54 million yuan, up 73.43% year on year and 9.95% month on month.
Key points of investment
Revenue and profit exceeded expectations, and gross margin increased month-on-month. 2024Q1 achieved operating income of 387 million yuan, up 21.71% year on year, down 4.66% month on month; realized net profit of 54 million yuan, up 73.43% year on year and 9.95% month on month. The steady increase in 24Q1's revenue is mainly due to the fact that both new and old customer businesses contributed to growth compared to the same period last year, as well as the rapid growth of the next generation of cost-effective product lines ESP32-C3, ESP32-C2, and the high-performance product line ESP32-S3. 24Q1 achieved a comprehensive gross profit margin of 41.93%, up 1.22 percentage points year on year and 1.86 percentage points month on month. Under the premise of revenue growth and a month-on-month increase in gross margin, the 24Q1 company has good cost control. The cost growth rate is less than the revenue growth rate, and the profit side growth rate is higher than the revenue side growth rate. The company's chip customers mainly use RMB pricing. The cost is mainly in US dollars. The gross margin of the chip is higher than that of the module. Even if the appreciation of the US dollar puts pressure on the gross margin of the chip, the gross margin of the chip in a single quarter of 24Q1 reached a high level of 47.10%, and the gross margin of the module was 38.06%. 24Q1's chip and module products accounted for 42.7%/56.7% of revenue respectively. The revenue share for the same period last year was 34.2%/64.6%, respectively. The increase in 24Q1's comprehensive gross margin was mainly due to structural changes due to the increase in chip share.
The product matrix continues to expand, and new products are launched one after another. The company's next new product, ESP32-C3/C2/S3, has maintained rapid growth. In addition, ESP32-C6, which has been mass-produced in 23, is expected to enter a high growth period this year. The C6 is the company's first dual-core RISC-vSoC that supports Wi-Fi 6. It integrates 2.4GHz Wi-Fi 6, Bluetooth 5 (LE) and 802.15.4 protocols to provide higher transmission efficiency and lower power consumption for IoT devices; the ESP32-H2 will gradually launch in the second half of this year and enter next year High growth period; recently, the company launched ESP32-H4, and the next-generation SoC incorporating 802.15.4 and Bluetooth 5.4 (LE) technology has undergone significant upgrades in terms of power consumption, connectivity performance, and memory expansion capabilities. R&D results based on ESP32-H2 chips and software can be reused, and the speed at which the ESP32-H4 enters a period of high growth may accelerate. The company's newly released ESP32-P4 has achieved RISC-V dual-core 400MHz main frequency, has higher computing power, can meet the high-performance computing requirements of multiple IO, HMI and AIoT applications, and is used in application scenarios that require combined camera, screen and AI processing. The company continues to develop higher main frequency product lines based on the RISC-V instruction set, and is expected to continue to introduce new applications covering more application scenarios.
Investment advice
We expect the company to achieve revenue of 18.31/23.63/3,065 billion yuan in 2024-2026, and realized net profit of 1.88/281/381 million yuan respectively. The current stock price corresponding to 2024-2026 PE is 48 times, 34 times, and 24 times, respectively, giving it a “buy” rating.
Risk warning:
Market demand falls short of expectations; new product development and market expansion fall short of expectations; market competition intensifies, etc.