Lexin Technology released its 2024 semi-annual report. 24H1 revenue was 0.92 billion yuan, +38% year over year; net profit to mother was 0.152 billion yuan, +135% year over year. The company's new customers and applications continue to expand, and many new products continue to grow at a high rate, and profits are released at an accelerated pace. Maintain an “Overweight” rating.
24H1 chip module revenue increased rapidly year on year, and profit increased high year on year. 24H1 revenue of 0.92 billion yuan, +38% year over year, including chip revenue of 0.38 billion yuan, module revenue of 0.53 billion yuan, +21.5% year on year; gross profit margin of 43.2%, +2.4pcts year on year; net profit to mother 0.152 billion yuan, +135% year on year; net profit to mother 0.167 billion yuan, +117% year over year; net profit of 0.146 billion yuan, year over year + 170%
24Q2 chip module revenue grew steadily month-on-month, and profits were released at an accelerated pace. 24Q2 revenue 0.533 billion yuan, +53% YoY +38%, of which chip revenue was 0.216 billion yuan, +91.3% YoY +30.5%, module revenue 0.312 billion yuan, +34.5% YoY/42.3% YoY; 24Q2 gross profit ratio 44.4%, +3.1 pcts/month-on-month +2.2pcts; net profit to mother 0.098 billion yuan, YoY +192% /month-on-month +81%; net profit deducted 0.098 billion yuan, +243% YoY/+104% month-on-month; non-net interest rate deducted for a single quarter reached 18.3%, +10.2pcts/month-on-month +6pcts. As of 24H1, the company's inventory was 0.38 billion yuan, an increase of nearly 0.1 billion yuan over the previous month. The company's new and old customers all grew. The C3/C2/S3 series of sub-new products grew rapidly, and Q2 revenue increased rapidly; the company's gross margin rose steadily due to cost reductions, changes in product structure, and improvements in the competitive landscape; expenses were reduced due to revenue scale effects. The cost ratio during the Q2 period was -6.5 pcts/month-on-month -5.4 pcts, and the company's profit growth rate was far higher than revenue growth.
The company's gross margin has been rising steadily. 24H1's chip gross margin was 49%, +1.5pcts year on year, module gross margin was 38.9%, +1.5pcts year on year; 24Q2 chip gross margin was 50.5%, +1.8pcts/month-on-month +3.4pcts, module gross margin was 39.5%, +1.4pcts month-on-month. The company's gross margin has risen steadily, mainly due to ① the price of raw materials being low; ② the number of new customers and higher gross margin in the early stages; ③ handheld miniaturized devices tend to use chips, and the gross margin of chips is higher than that of modules; ④ the competitive landscape has improved, and downstream module manufacturers have increased the number of chips purchased.
The company continues to expand its product categories, and many products are expected to enter a period of high growth in 2024. The company C6 has now begun to contribute revenue and is in a state of high growth. It is expected to enter the next new category at the end of the year; H2 has already been mass-produced, relying more on Matter's development. Matter recently released version 1.3, and mass official shipments are expected to begin in the second half of the year. The H series is expected to achieve rapid growth in 2025; the P4 began retail sales in early July, and growth is expected to improve next year; the C5 product is expected to begin sample delivery within the year, and small-batch production on the client side will begin next year.
Investment advice. The company's domestic and international demand continues to recover, sub-new products are being released rapidly, and new applications and customers are constantly increasing. The company entered a normal replenishment cycle, and 24H1's performance grew at a high year-on-year rate. We expect revenue for 2024/2025/2026 to be 1.96/2.48/3.01 billion yuan, and the net profit to mother for 2024/2025/2026 is 0.32/0.44/0.56 billion yuan, corresponding PE is 35.8/26.4/20.7 times, maintaining an “incremental” investment rating.
Risk warning: Risks that demand recovery falls short of expectations, product development progress falls short of expectations, intelligent penetration rate increases less than expected, new product release falls short of expectations, and industry competition intensifies.