Description of the event
On April 29, Aojie Technology announced the “Report for the First Quarter of 2024”. 2024Q1 achieved operating income of 830 million yuan, +103.34% year-on-year, and +9.83% month-on-month. Net profit loss to mother was -125 million yuan, a year-on-year decrease of 70 million yuan.
Incident comments
Warmth is gradually showing, and the recovery in demand for the Internet of Things has boosted the improvement of the company's operations. Driven by the gradual recovery of the downstream IoT market, the company achieved operating income of 830 million yuan, +103.34%, and +9.83% month-on-month, net profit loss to mother of -125 million yuan, a year-on-year loss of 0.7 billion yuan, achieving a gross profit margin of 23.79%, -0.75pct year-on-year, +0.20pct month-on-month, net interest rate of -15.09%, +32.85pct year-on-month, and -4.57pct month-on-month. During this period, the company continued to invest in R&D. The 2024Q1 R&D expenditure was 316 million yuan, +7.12% year over month, and the R&D cost rate decreased by 34.25 pcts to 38.12% year over year. The R&D cost rate control and R&D efficiency optimization were very effective. It is worth noting that the company's 2024Q1 inventory was 1,365 million yuan, -7.81% month-on-month. At the same time, notes and accounts receivable were 440 million yuan, +68.70% year-on-year, and +64.33% month-on-month. The company's sales accelerated. Revenue growth to be confirmed in the future will be faster, and revenue growth in subsequent quarters can be expected, driving the improvement of business conditions.
Years of trekking have reached its peak, and domestic cellular baseband players have gradually achieved various breakthroughs. Cellular baseband and radio frequency communication chip circuits have high technical barriers, and the market pattern is gradually concentrated, and there are few players that can participate. Aojie Technology has gradually accumulated cellular baseband technology from 2G to 5G, and has a large number of self-developed IPs and products in various areas such as signal processing, high-performance analog/RF circuits, communication protocol stacks, and low power circuit design. In 2023, the company completed research and development of a number of new products, including the first 4G smartphone baseband chip, the first 5G REDCap cellular IoT chip, and 30 chip streams, including the next-generation WiFi6 chip, and various LTE cellular IoT chips, including: 1) 4G smartphone chips are steadily advancing the development and commercialization process of the first chip, completing streaming in the first quarter of 2023, completing technical index verification in the second quarter, and customer introduction in the third quarter. At the end of 2023, various products including smartphones and smartwatches are on the client side The product project was completed, and product development is progressing smoothly; 2) The 5G eMBB terminal chip successfully passed China Mobile's chip storage certification. The development of products in key areas such as 5gRedCap, satellite internet, and 5G car networking continues to advance, and the connected car chip has reached cooperation with many automobile manufacturers such as FAW and SAIC; 3) The ASR1606 chip has been certified by mainstream North American operators (T-Mobile, AT&T). In the Indian market, the product successfully entered India's largest operator RelanceJio, the largest The supply chain of payment license brand PayTM and JioPay, the largest carrier payment brand.
A new pillar of the smart terminal business is gradually taking shape, and growth is steady in the medium to long term. The company has become one of the few chip companies covering multi-standard cellular, multi-protocol and non-cellular. In the future, with the continuous upgrading of multiple business lines such as 4G-5G-5gRedCap-satellite Internet, and gradually gaining customer recognition in the smartphone main chip market, the company is expected to achieve long-term steady revenue growth, and as the company's pre-R&D investment settles and R&D efficiency increases, the company's overall operating efficiency will continue to improve in the future. Currently, the company's main revenue comes from IoT chips. In the future, mobile phone revenue will gradually become a new growth engine and cover R&D investment. The company is expected to gradually turn losses into profits. The new investment opportunities in domestic baseband chips are worth paying attention to.
We expect the company's revenue in 2024-2026 to reach 34.57, 44.10, and 6.015 billion yuan. The corresponding PS is 5X, 4X, and 3X, maintaining a “buy” rating.
Risk warning
1. The risk that the semiconductor boom falls short of expectations;
2. The risk that the issuance of convertible bonds will be blocked.