Incident review

On August 28, 2024, the company released its 2024 mid-year report. In 2024, H1 achieved operating income of 1.306 billion yuan, a year-on-year increase of 27.63%; net profit to mother was 0.033 billion yuan, a year-on-year decrease of 31.18%. Among them, Q2 achieved revenue of 0.731 billion yuan in a single quarter, up 26.08% year on year and 27.27% month on month; realized net profit to mother of 0.027 billion yuan, down 11.48% year on year, up 317.75% month on month.

Management analysis

Gross margin improved quarterly, and net profit after deducting non-return to mother grew rapidly: in the first half of 2024, the company achieved revenue of 1.306 billion yuan, and the semi-annual revenue reached a record high. Among them, Q2 achieved revenue of 0.731 billion yuan in a single quarter, and revenue in a single quarter reached a record high.

In Q2, net profit returned to mother steadily rebounded, with a sharp increase of 317.75% over the previous month. Affected by the structure of shipped products, some products with low gross profit levels were shipped centrally during the reporting period, reducing the overall gross margin level in stages. In the first half of the year, the company achieved a gross profit margin of 16.59%, down 3.82 pcts from the same period last year. However, Q2 gross margin was 17.30%, up 1.61 percentage points from month to month, and the gross margin situation showed a trend of improving quarter by quarter. The company's net profit to mother decreased by 31.18% year-on-year, mainly due to a sharp decrease in non-recurring profit and loss of 22.9051 million yuan, and an increase in financial expenses due to exchange losses of 11.9763 million yuan. The company's net profit without return to mother increased by 31.98% year on year, higher than the revenue growth rate of 4.35 pct.

Overseas market revenue continues to grow rapidly, and revenue in the smart connected vehicle sector continues to grow rapidly:

From a regional perspective, the company continues to expand its business layout and product development in overseas markets, increasing its popularity and growing rapidly in revenue. Overseas regions achieved revenue of 0.44 billion yuan in the first half of 2024, an increase of 38.58% over the previous year, and the share of overseas revenue increased by 2.67 pcts to 33.73%. From an industry perspective, the company continues to ship large quantities of 5G smart cockpit modules and vehicle-grade digital transmission modules to core automotive customers, driving revenue in the smart connected vehicle sector to maintain rapid growth. The IoT industry has strong demand for customized and intelligent products from overseas markets, and domestic customer demand is back on a growth trajectory. Companies in the FWA field work closely with chip manufacturers to continuously implement key 5G projects in North America, Europe, Japan and other regions, and the development trend is good. The company's performance is expected to continue to grow in the future.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2024-2026 to be 2.796/3.409/4.058 billion yuan, respectively; net profit to mother will be 0.121/0.166/0.212 billion yuan respectively, corresponding PE is 48/35/27 times, maintaining a “buy” rating.

Risk warning

The development of the Internet of Things fell short of expectations; international relations were disrupted; industry competition intensified; and exchange rates fluctuated.