2Q24 The company's performance is in line with previous performance forecasts and in line with our expectations

The company announced 2Q24 results: 1H24 achieved revenue of 3.037 billion yuan, +21.59% year over year; net profit to mother 0.105 billion yuan, +62.79% year over year; net profit after deducting non-return to mother 0.074 billion yuan, +37.31% year over year. Corresponding to 2Q24, the company achieved revenue of 1.768 billion yuan, +25.3% year over year; net profit to mother 0.076 billion yuan, +32.2% year over year; net profit after deducting non-return to mother 0.065 billion yuan, +25.0% year over year.

The company's performance is in line with previous performance forecasts and in line with our expectations.

The audio industry at home and abroad is under pressure, and the company relied on major customers and new orders to achieve contrarian revenue growth: 1) According to data from the US Customs Service, US speaker imports in 2Q24 were -12.8% year-on-year. The overseas audio industry's inventory removal cycle continues, and the overall downward pressure is strong. 2) In terms of the domestic market, according to Lotu Technology, the online sales/sales of 1H24 traditional domestic Bluetooth speakers were -0.4%/+3.0% year-on-year; the sales volume/sales of the 1H24 smart speaker was -29.8%/-33.8% year-on-year, respectively. 3) The company benefited from the expansion of the downstream share of major customers and the increase in orders, and achieved a contrarian increase in revenue. 1H24's speaker and speaker revenue was +13.2% year-on-year, contributing to the main revenue increase; the battery and electronic parts business also performed well.

Appropriate cost control and increased investment in R&D: 1) 2Q24's gross margin was +0.5ppt to 14.0% year over year, mainly due to improved production efficiency and battery business gross margin restoration; current net profit margin was +0.2ppt to 4.3% year over year. 2) 2Q24's R&D/management expense ratio was +0.4pp/ +0.5ppt to 5.5%/3.8%, respectively, mainly due to the company's increased investment in R&D and the increase in employee costs. 3) The 2Q24 company's inventory was +52% month-on-month to 1.1 billion yuan, mainly due to the increase in raw materials and inventory products due to revenue growth.

Development trends

Laying out emerging fields such as car audio, AI smart speakers, and XR acoustic accessories: 1) The company announced that in 2023, it has been designated by many leading domestic NEV customers for multiple models, and has also received orders from foreign automobile customers. 2) The company is an important supplier to global technology leaders such as Amazon and Apple. The ChatGPT smart speaker was released in 2023. The domestic version incorporates the Wenxin Yiyun system, and the overseas version incorporates the ChatGPT system. In addition, the company already has VR/AR acoustic modules and complete products, and has reached cooperation with well-known domestic and foreign brands. 3) As detailed in our previous in-depth report, we are optimistic that the company will use its deep accumulation in the field of acoustics to develop new customers in the automotive sector, as well as the company's profit growth and profit structure improvements brought about by the automobile business.

Profit forecasting and valuation

We have kept our profit forecast for 2024/2025 largely unchanged. The current stock price corresponds to 25 times the 2024 price-earnings ratio and 23 times the 2025 price-earnings ratio. Maintain outperforming industry ratings. Due to the decline in the valuation center of the industry, we lowered our target price by 13% to 15.60 yuan, which corresponds to 35 times the price-earnings ratio of 2024 and 32 times the price-earnings ratio of 2025. There is 39% room for growth compared to the current stock price.

risks

The risk of new business development falling short of expectations, the risk of market demand fluctuations, and the risk of market competition.