2Q24: Revenue reached a record high in a single quarter. The scale effect gradually showed that 2Q24 achieved revenue of 0.878 billion yuan (yoy: +66.80%, qoq: +34.45%), net profit to mother of 0.12 billion yuan (yoy: +140.00%, qoq: +334.87%), net profit of 0.103 billion yuan (yoy: +237.50%, qoq: +1028.36%). Demand in the 1H24 smart wearable and smart home market continues to grow, and the company's market share in the smartwatch/bracelet category increased rapidly. At the same time, the next-generation wearable chip BES2800 achieved mass production and shipment, driving the company's 2Q24 revenue to achieve year-on-month growth. The gross margin and expenses of the 2Q24 company remained stable. The 2Q24 gross margin increased 0.46pct to 33.39% month-on-month, and the increase in profit significantly exceeded the increase in revenue due to the scale effect. We maintain the company's net profit forecast of 0.394/0.6/0.795 billion yuan for 24/25/26. Considering that the company is a global leader in wearable chips, BES2800 will be deployed on a large scale in the second half of the year, giving 55x 24PE (comparable companies agree to 49x), with a target price of 180.4 yuan, and an “increase in weight” rating.

1H24 review: Demand for wearable products continues to grow, and the company's share is rising steadily. According to IDC statistics, domestic Bluetooth headset market shipments reached 55.4 million units in the first half of 2024, an increase of 20.8% over the previous year. Combined with the company's next-generation wearable chip BES2800 to achieve mass production and shipment in the first half of the year, we expect 1H24's headset-related product revenue to grow faster than the industry's sales growth rate. In addition, the company has achieved full coverage of smartwatches, sports watches and bracelets, and its market share has grown rapidly, and the revenue share of 1H24 watch/bracelet products has increased to around 28%. Thanks to the easing of competition in the 1H24 wearable chip market, the company's gross margin basically stabilized. 2Q24 was 33.39% (yoy: -1.30pct, qoq: +0.46pct). In terms of inventory, as of the end of 2Q24, the company's inventory was 0.683 billion yuan, an increase of 0.039 billion yuan over the end of the previous quarter. We expect to mainly prepare stocks for the peak season in the third quarter.

2H24 outlook: BES2800 is expected to penetrate more terminals and benefit from AI end-side development. Considering the third quarter as the traditional peak season for consumer electronics, we expect revenue to continue to grow month-on-month. Specifically: 1) Demand in the wearable market remains strong. On the one hand, flagship products increase sales by increasing AI features, and low- and mid-range products are also replacing the white card market through price decline; 2) The company's next-generation wearable chip, BES2800, has now been introduced in several customers' headphone, smartwatch, smart glasses and other projects. It is expected that the second half of the year will gradually begin. quantity. Over the long term, the company has always maintained leadership in connectivity technology (Wi-Fi, Bluetooth, Starlight, etc.), audio and display technology, health monitoring technology, etc., and can meet the demands of brand customers for continuous product upgrades. In the future, it is expected to further expand into flagship watch main chips and smart glasses while stabilizing the market share of headphone chips.

Investment advice: The target price is 180.4 yuan, maintaining the “gain” rating. We are optimistic that the company will always maintain the leading product definition in the field of wearable chips, helping the company continue to increase its share in the headphone, watch/bracelet, and smart glasses markets. Maintain the 24/25/26 net profit forecast of 0.394/0.6/0.795 billion yuan, giving 55 times 24PE (49x the company's unanimous estimate), and a target price of 180.4 yuan, with an “increase in weight” rating.

Risk warning: Downstream demand weakens, market competition intensifies, core technicians leave their jobs, and shareholders lose their holdings.