Incident: Jiulian Technology released its 2023 annual report and 2024 quarterly report: In 23, the company achieved revenue of 2.171 billion yuan (-9.65%), net profit to mother of 199 million yuan (60.4 million yuan in '22), net profit after deducting non-attributable net profit of 193 million yuan (61.35 million yuan in '22), gross margin of 11.58% (-8.99pct year on year); 24Q1 achieved revenue of 662 million yuan (YoY +22.51%), net profit to mother of 4.52 million yuan (YoY -48.34% YoY) Significant loss reversal), net profit of 2.6 million yuan (-71.03% YoY), gross margin of 14.99% (-3.14pct YoY, +7.72pct month-on-month), net operating cash flow of 8.05 million (23Q1 was -49.35 million, a significant year-on-year improvement).

Communication modules and operation services grew rapidly in '23, and Hongmeng's related revenue accounted for more than 10%. By business:

The smart terminal business achieved revenue of 1,640 billion yuan (-22.36% YoY), with a gross margin of 13.87% (year-on-year -7.32pct), mainly due to the lengthening of the bidding cycle and supply cycle of operators, and lower bidding limits and sales prices based on falling prices of the main raw materials of smart terminal products; communication modules and industry application solutions achieved revenue of 380 million yuan (+88.7% year over year), of which the company's revenue related to Hongmeng Ecology accounted for more than 10% of the company's total revenue, covering smart meters, smart homes, smart energy, and intelligence In application fields such as cities, intelligent medical care, and vehicle networking, related products have begun to gain market size; operating services achieved revenue of 88.31 million yuan (+129.79% over the same period last year),? Take a stake in Taiyi Technology to forward-looking layout of the low-altitude economy. According to Huizhou Daily, Taiyi Technology focuses on the application and expansion of drone technology in the smart city field, and has always been committed to exploring drone systems combined with remote sensing technology, artificial intelligence, machine vision, fully automated driving systems research and development, low-altitude sensing data production and operation services; it has independently invested and built the largest drone sensing network in the country, covering 180,000 square kilometers; it has successively participated in formulating 3 sets of international standards in the field of drones and 9 sets of national standards in the field of drones. It has obtained more than 180 patents and has rapidly grown into one of the leading enterprises in China's low-altitude digital economy. According to Wind, Jiulian Technology held 10% of Taiyi Technology's shares through its wholly-owned subsidiary Zhuhai Jiulian Wanrong Investment Co., Ltd. on August 18, 2022. According to the Jiulian 23 annual report, it holds 10% of Taiyi Technology's shares and has 10% voting rights for Taiyi Technology, but it is represented on the board of directors of Taiyi Technology and participated in decisions on Taiyi Technology's financial and operating policies, so it can exert a significant influence on Taiyi Technology.

Profit forecast: We expect the company's revenue for 2024-2026 to be 3.42 billion yuan, 4.535 billion yuan and 5.871 billion yuan respectively, net profit to mother of 145 million yuan, 267 million yuan, 426 million yuan, and EPS 0.29 yuan, 0.53 yuan, and 0.85 yuan respectively. Referring to the company's historical valuation and the average valuation level of comparable companies, the company was given a 2024 dynamic PE range of 50-55X, corresponding to a reasonable value range of 14.54-15.99 yuan, which is “superior to the market” rating.

Risk warning: operators' capital expenses fall short of expectations; new business markets such as Hongmeng, Xinchuang, computing power, and low altitude fall short of expectations; market competition intensifies.