The company performed well in the second quarter. The company released the 2024 semi-annual performance forecast. It is expected to achieve revenue of about 1.531 billion yuan in the semi-annual year of 2024, an increase of about 68.24% over the previous year; net profit to mother is expected to be around 0.148 billion yuan in the semi-annual period of 2024, an increase of about 199.68% over the previous year. Looking at a single quarter, the second quarter is expected to achieve revenue of about 0.878 billion yuan, an increase of about 66.76% over the previous year. Net profit to mother was approximately 0.12 billion yuan. In terms of gross margin, the gross profit margin for sales in the second quarter was around 33.40%.

Demand in downstream wearables, smart home and other terminal markets is growing, and AI wearable penetration is increasing. Markets such as wearable consumer terminals are continuing to pick up. According to Canalys data, shipments of personal intelligent audio devices in mainland China in Q1 were 19.5 million units, an increase of 23% over the previous year. From a global perspective, global Q1TWS headphone market shipments reached 65 million, an increase of 6% over the previous year. Looking forward to the future, the gradual advancement of AI will place new requirements on the processing, interaction, and connectivity capabilities of current smart terminals. The company has a perfect layout of products such as low power consumption and high computing power, continuously enhancing competitiveness and market barriers to meet the needs of future smart terminal products.

The company mass-produces new products such as BES2800, and the application scenarios continue to expand, and the market share is increasing. The company continues to iterate on the key core technologies of audio and video SoC main control chips in the smart wearable and smart home fields with continuous high-intensity R&D investment, and the technology remains at the cutting edge. The company's next-generation smart wearable chip, the BES2800, achieved mass production and shipment. The single chip integrates multi-core CPU/GPU, NPU, high-capacity storage, low-power Wi-Fi, and dual-mode Bluetooth to provide powerful computing power and high-quality seamless connection experience for wearable devices such as TWS headsets, smart watches, smart glasses, and smart hearing aids. After the proportion of new products increased, it had a driving effect on the overall ASP. At the same time, looking at application scenarios, in the TWS headphone field, it continues to replace white brand headsets in the market share, and the TWS headphone penetration rate continues to increase; in terms of application expansion, the company's coverage of watches, bracelets, glasses, etc. is gradually increasing, opening up new downstream markets.

Investment advice: The company is expected to achieve net profit of 0.382/0.593/0.789 billion yuan in 2024-2026, respectively. Given the company's leading position in TWS and wearables, considering the continuous recovery in the consumer electronics boom and the company's introduction of new products, a “buy” rating is given.

Risk warning: Downstream demand falls short of expected risk, industry competition increases risk, and new products fall short of expected risk.