Incident: On July 14, 2024, the company released a performance forecast. It is expected to achieve operating income of 1.531 billion yuan, yoy +68%; net profit to mother of 0.148 billion yuan, yoy +200%; deducted non-net profit of 0.112 billion yuan, an increase of 0.106 billion yuan over the previous year, yoy +1873%.

Revenue reached a record high in a single quarter, and gross margin recovered steadily. The company expects to achieve revenue of 1.531 billion yuan, yoy +68% in the first half of 2024, which is a significant increase, mainly due to the company's growth and new product release in the smart home/wearable market; achieving net profit of 0.148 billion yuan, yoy +200%, mainly due to revenue growth and cost reduction; deducting non-net profit of 0.112 billion yuan, an increase of 0.106 billion yuan, yoy +1873% year on year.

Among them, the company achieved revenue of 0.878 billion yuan in the second quarter, yoy +67%, qoq +34%, a record high; achieved net profit to mother of 0.12 billion yuan, qoq +336%; and achieved gross profit margin of 33.40% and qoq+0.47pct.

The results of the AIOT platform-based layout are beginning to be seen. The company's downstream market expansion progress is impressive:

1) The demand from customers in the downstream smart wearable and smart home sector continues to grow, driving the company's revenue growth; 2) the company continues to expand new products and customers in the smartwatch/bracelet market, and its market share gradually increases; 3) The company's next-generation smart wearable chip, the BES2800, achieved mass production and shipment.

The company began to lay out the smart wearable field in 2021. In that year, it successfully mass-produced the first generation smartwatch chip BES2500BP, and launched the industry's first single-chip main control, the BES2700BP, in 2022. Currently, the company's products have entered well-known domestic manufacturers, and it is expected to grow together with them. Furthermore, the company continues to advance into the field of high-end smartwatches, and the value of stand-alone devices is expected to increase.

Continued investment in R&D, product competitiveness has been steadily improved. The company continues to invest in R&D, with Q1 R&D expenses of 0.165 billion yuan, yoy +37.98%. With continuous R&D investment, the company completed mass production of products such as 2,700 iBp and WIFI 6 chips in 2023, and 2800 series products for TWS headsets, smartwatches and other application scenarios have also been mass-produced and shipped, so future revenue growth can be expected. Furthermore, we believe that the company's new BES2800 series deserves special attention. It uses a 6nm process, integrates WiFi and Bluetooth modules, and supports local sensor network algorithm processing. It can provide powerful computing power and a high-quality seamless connection experience for products such as TWS headsets, smart watches, smart glasses, smart hearing aids, etc., and conforms to the development trend of AI in wearable products.

Investment advice: As the results of the company's AIOT platform-based layout gradually became apparent, and the product competitiveness steadily improved, we upgraded the company's 24-26 revenue to 3.24/3.78/4.52 billion yuan, and net profit to mother to 0.33/0.44/0.57 billion yuan. Calculated at the closing price on July 12, 2024, the corresponding PE was 56/43/33 times, maintaining a “buy” rating.

Risk warning: New product development progress falls short of expectations, downstream market demand falls short of expectations, market competition intensifies, supply chain risks