Incident: The company released the 2024 semi-annual performance forecast. It is expected that 2024H1 will achieve revenue of about 1.531 billion yuan, an increase of about 68.24% year on year; 24H1 is expected to achieve net profit of 0.148 billion yuan to mother, an increase of 199.68% year on year.

Demand is improving, new products continue to be developed, and revenue in a single quarter has reached a record high: demand from the company's downstream smart wearables and smart home customers continues to grow, driving the company's revenue growth; at the same time, the company's smartwatch/bracelet market continues to expand new products and new customers, and the market share is gradually increasing; the company's new smart wearable chip, BES2800, achieved mass production and shipment, and the new product is expected to drive ASP+ product structure optimization. Taken together, the company's Q2 single is expected to reach about 0.878 billion yuan, a year-on-year increase of about 66.76%, and a record high revenue for the single quarter.

Gross margin has steadily rebounded, and operating leverage is prominent: as the industry gradually enters an upward cycle and demand from the company's new products accelerates, the company's revenue scale maintained rapid growth, and the cost ratio decreased during the period, while gross margin rebounded steadily. Q2 Company expects to achieve a gross profit margin of about 33.40%, an increase of about 0.47 percentage points over the previous month, and the operating leverage effect gradually became prominent.

Investment suggestion: In the future, as the company continues to accumulate technology in terms of power consumption, processing, connectivity, etc., it will continue to explore the smart watch, smart home, and AR wearable markets. We expect the company to achieve operating income of 3.197/4.22/5.369 billion yuan and net profit of 0.34/0.539/0.73 billion yuan in 2024-2026. The corresponding PE was 60.82/38.41/28.37 times, respectively, maintaining the “gain” rating.

Risk warning: New product launch progress falls short of expectations; terminal sales fall short of expectations; industry competition intensifies; customer development falls short of expectations.