Key points of investment:
Cellular baseband technology is the core, actively expanding business incremental space
Established in 2015, Aojie Technology has carried out a broad and comprehensive technical layout for wireless communication technology. The company's cellular baseband chips are the basic model. The revenue scale in 2023 reached 2,079 billion yuan, accounting for 79.97% of total revenue. It is expected that the future will continue to benefit from growing demand for the Internet of Everything. We are optimistic about the company's future multi-point layout, and the logic for actively expanding incremental space is as follows:
Core highlights In #1：物联网产品优势明显，可穿戴市场产品广受认可公司深耕蜂窝物联网市场，2023, the company's Cat.1bis market segment ranked first; Cat.4 is speeding up the domestic substitution process. ASR1806 has passed ACE-Q100 certification, and the development of the connected car market may empower the company. Meanwhile, the company's first 5G REDCap chip, ASR1903, was released ahead of schedule in February 2024, leading the way into the first year of 5G commercialization.
With product advantages, the company is actively expanding the wearable market on the basis of the continuous development of traditional IoT infrastructure. Canalys predicts that overall shipments of wearable wristband devices are expected to reach 217 million units by 2025, with smartwatches growing faster than other wearable wristband categories. As an important player in this field, the company has further set up a special project, with smartwatches as the core. On the basis of enriching the original children's watch product line, the company continues to improve the three core capabilities of “communication,” “battery life,” and “high integration” to create a complete set of wearable device solutions from chips to complete software SDK. At present, the company's wearable chips are widely used in smart watches of many well-known brands around the world.
The key point is that the company's smartphone SoC came out of nowhere in #2：2024. From 4G to 5G, global smartphone shipments were 1.17 billion units in 2023. Although there was a year-on-year decline, it is still an incremental market with vast space. The company is steadily advancing the development and commercialization process of the first 4G SoC chip. 23Q1's 4G SoC chip was successfully streamed, and customer introduction began in Q3. According to the company's official Twitter in June '24, the company's 4G SoC smartphone chip ASR8601 and the LogicMobility L65A phone debuted in the Latin American market. ARM Cortex-A series processor architecture upgrades and technology iterations are also expected to empower the company's products. In the future, the company will continue to iterate on 4G smartphone chips and will launch 5G smartphone chips in due course. We are optimistic that the company will stabilize and gradually open up a broad space in the smartphone market.
Profit forecasting and investment advice
We expect the company's revenue for 2024-2026 to be 32.42/42.77/6.037 billion yuan, corresponding to 2024-2026 PS multiples of 5.3/4.0/2.8X, respectively. Considering that the company's cellular baseband chip business still has potential for growth in the future, and it is expected to open up a second growth space for smartphone chips, the first coverage was given a “buy” rating.
Risk warning
The risk of market competition, the risk of product development falling short of expectations, and the risk of new product delivery falling short of expectations.