The wireless communication module and IoT industry is booming. According to the “2023 Communications Industry Statistical Bulletin” issued by the Ministry of Industry and Information Technology in January 2024, the number of cellular IoT users in China is growing at an accelerated pace; the “Interpretation of the 2023 Communications Industry Statistics Bulletin” published at the same time shows that IoT terminal connections account for nearly 60%. By the end of 2023, the total number of mobile network terminal connections in China reached 4.059 billion, of which the number of cellular IoT terminal users reached 2.332 billion, accounting for 57.5% of the number of mobile terminal connections, an increase of 26.4% over the previous year, with a net increase of 0.488 billion in 2023; the scale of cellular IoT terminals used in public services, vehicle networking, smart retail, smart homes and other fields reached 0.799 billion, 0.454 billion, and 0.335 respectively billion and 265 million households.

5G+AI accelerates the digital transformation process. The new network technology represented by 5G has ushered in a new era of the Internet of Everything, revolutionized device access and information transmission capabilities, and promoted the rapid growth of edge traffic, especially industry traffic. The demand for massive data storage, processing, calculation, and analysis has increased the investment needs of enterprises in new infrastructure such as data centers, cloud computing, and artificial intelligence. Furthermore, 5G IoT is developing rapidly. According to Grand View Research data, the global 5G IoT market will grow at a CAGR of 50.2% in 2023-2030 and reach $89.42 billion by 2023. New analytical technology represented by AI is based on data collection and analysis to improve efficiency and productivity, change decision-making models, and break through the boundaries of human capabilities.

The company adheres to the wireless communication module+IoT solution two-wheel drive product strategy. On the basis of continuously consolidating the comprehensive capabilities of general-purpose data transmission module products, the company creates a differentiated and innovative core competitive advantage with vertical industry customized solutions such as intelligent modules, high computing power modules, and smart cockpits, FWA, and IoT. The company has rich experience in the field of intelligent modules and solutions, and continues to invest in high computing power modules and generative AI applications, so that the company has strong business development and market competitiveness in the wireless communication module and IoT solutions industry, driving the company's long-term growth. The company's related products are mainly used in (1) the field of intelligent connected vehicles (smart cockpit, T-BOX, ADAS\ DMS, assisted driving, vehicle monitoring, etc.), (2) 4G/5G FWA fixed wireless access, and (3) the IoT pan-connectivity field represented by new retail, financial payments, smart logistics, industrial Internet, sharing economy, and smart home.

Profit forecast, valuation and rating: According to the company announcement, due to continued investment in R&D and sales, there will be a certain impact on the company's net profit in 2023, and this impact is likely to continue. We lowered the company's 2024-2025 net profit forecast to 0.111/0.153 billion yuan, a decrease of 61%/62% from the previous one. The new company's 2026 net profit forecast was 0.19 billion yuan, corresponding to PE45/33/26X. We are optimistic about the company's long-term growth potential and maintain the “gain” rating.

Risk warning: Market expansion falls short of expectations; there is a risk that gross margin will decline due to fierce competition.