2024H1 performance is expected to increase year-on-year, with demand recovery boosting performance growth, maintaining the 2024 semi-annual performance forecast issued by “buy” rating companies. 2024H1 expects revenue of 1.531 billion yuan, +68.24% year over year, and is expected to achieve net profit of 0.148 billion yuan, +199.68% year over year; it is expected to deduct non-net profit of 0.112 billion yuan, or +1873.29% year over year. According to our calculations, 2024Q2 expects revenue of 0.878 billion yuan, +66.76% year over month, +34.39% month on month, net profit to mother 0.12 billion yuan, +140.72% year over year, and +336.18% month on month. It is expected to deduct non-net profit of 0.103 billion yuan, +237.17% year over year, and +1027.24% month on month. Benefiting from the continued recovery in downstream demand, we raised our profit forecast for 2024/2025/2026. The net profit for 2024/2025/2026 is 0.403/0.69/0.879 billion yuan (previous value was 0.28/0.465/0.595 billion yuan), and the 2024/2025/2026 EPS is expected to be 3.36/5.75/7.32 yuan (previous value was 2.33/3.87/4.96 yuan). The current stock price corresponds to PE 51.9/30.3/23.8 times. We are optimistic about the growth momentum brought about by the continued recovery in downstream demand and the continued release of the company's products, and maintain the “buy” rating.

The recovery in demand+mass production of new products brought revenue growth. The revenue scale effect helped increase performance by 2024H1, benefiting from the continued growth in demand in the downstream smart wearables and smart home sector, the company's continuous expansion of new products and customers in the smartwatch/bracelet market, and the gradual increase in the company's market share, driving the company's revenue to achieve high growth. At the same time, it also benefited from mass production and shipment of the company's next-generation smart wearable chip BES2800. Benefiting from the scale effect brought about by the year-on-year increase in the company's revenue, the company's expense ratio decreased during the period, and the company's gross margin recovered steadily. The gross margin is expected to reach around 33.40% in 2024Q2, +0.47pcts compared to the previous month, and the company's performance achieved high growth.

Downstream demand continues to recover and product volume is sufficient. According to Canalys forecasts, global smartwatch shipments are expected to increase 17% year-on-year in 2024, and downstream demand is expected to continue to recover; at the same time, the company's next-generation 6nm smart wearable chip BES2800 has been successfully used in watch products from major brands, and the company's chips have entered the AR glasses supply chain. We believe that as downstream demand continues to recover and the company's products continue to be released, the company's revenue is expected to continue to grow and grow sufficiently .

Risk warning: downstream demand falls short of expectations; promotion of new products falls short of expectations; industry competition intensifies.