Key points of investment:

Announcement: The company achieved operating income of 3.037 billion yuan in the first half of 2024, up 21.59% year on year, and net profit to mother 0.105 billion yuan, an increase of 62.79% year on year. Gross margin was 12.87%, up 0.18pct year on year, and net margin was 3.46%, up 0.88pct year on year. The performance was in line with expectations.

Net revenue and profit both increased, seeking more ODM/JDM orders. In the second quarter, revenue of 1.768 billion yuan was achieved, up 25.29% year on year, and net profit to mother was 0.076 billion yuan, up 32.18% year on year. The gross margin was 13.99%, up 0.55pct year on year, and the net margin was 4.29%, up 0.23pct year on year. Mainly because the company has been using the big customer development strategy to expand opportunities for in-depth cooperation with major customers. Achieve independent development and independent supply of the entire chain from glue, key acoustic components, acoustic modules, PCBA, batteries, and plastic parts to complete machine assembly. Implement a platform-based R&D model, standardize components and materials, scale suppliers, generalize tooling, and shift more to ODM/JDM.

Speaker and speaker revenue increased 13.2% year over year, leading the smart speaker 2.0 era. By business, speaker and speaker revenue in the first half of the year was 2.446 billion yuan, up 13.2% year on year, accounting for 80.58%; battery revenue was 0.22 billion yuan, up 22.39% year on year, accounting for 7.26%; and electronic spare parts revenue was 0.328 billion yuan, up 175.09% year on year, accounting for 10.8%.

The world's first AI speaker equipped with ChatGPT was jointly developed by Vifa and Guoguang Electric, and exclusively produced by Guoguang Electric. It relies on ChatGPT and Baidu Wenxin's one-word AI, and focuses on chatting with high emotional intelligence.

From virtual reality to spatial computing, the second half of the year was full of new XR products. According to IDC, VR/AR shipments are expected to increase by 44.2% to 9.7 million units in 2024. As global macroeconomic conditions improve, new products such as Apple's Vision Pro and Meta will help drive the industry's shipment volume growth. Guoguang is deeply tied to major customers at home and abroad, and has become a core supplier of acoustic modules. It supplies products stably to M customers, P customers, etc., and has many ongoing research and mass production projects. R&D and manufacturing of fidelity, chip type, miniaturization, thinness, low power consumption, and high power miniature speakers is an advantage.

Maintain profit forecasts and maintain an “gain” rating. Maintaining the 24-26 net profit forecast of 0.34, 0.416, and 0.51 billion yuan, the company's Bluetooth audio business is stable, and smart audio will benefit deeply from AI; the intelligent trend is driving rapid growth in the number and value of bicycle speaker configurations; VRAR binds large customers and has long-term growth potential. The current market value corresponds to PE 20, 16, and 13 times, respectively. In 2024, the average PE of comparable companies Rambler, Goertek, and Lixun Precision was 22 times, with room for increase of 14%, maintaining the “gain” rating.

Risk warning: Risk of sales of AI terminal products falling short of expectations; risk of major customers selling new products later than expected; risk of weakening consumer electronics demand due to macroeconomic and epidemic factors.