Hengxuan Technology released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 1.531 billion yuan, an increase of 68.26%; achieved net profit attributable to shareholders of listed companies of 0.148 billion yuan, an increase of 199.76% year on year; realized net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss of 0.112 billion yuan, an increase of 1872.87% year on year.

Key points of investment

Increased demand in the smart wear market drives product shipments to accelerate

In the first half of 2024, the company's smartwatch/bracelet chips accounted for about 28% of revenue, a significant increase over the previous year, driving the company's rapid revenue growth. Along with the increase in wearable device sales in the first half of the year, the overall pace of market shipments accelerated markedly. The company rapidly iterated on wearable chip products and launched new products such as BES2700IBP and BES2700iMP on the basis of the flagship chip BES2700BP, achieving full coverage of smartwatches, sports watches and bracelets. The company's shipment volume increased dramatically, achieving revenue of 1.531 billion yuan, a year-on-year increase of 68.26%, net profit of 0.148 billion yuan, a year-on-year increase of 199.76%, and the company's market share and competitiveness in the field of smart wearables increased rapidly.

Ultra-low power technology has been realized, and the demand for low-power and high-computing power of next-generation 6nm chips has continued to grow. Based on years of R&D accumulation in the field of low-power wearables, the company has achieved ultra-low power computing Soc technology, and launched a new ultra-low power wireless wearable chip BES2700iMP in the first half of 2024, which has been mass-produced and shipped in watch/bracelet products for brand customers. The dynamic and static power consumption of the chip has been greatly reduced, and can be widely used in extremely low power MCU scenarios such as smart watches/bracelets, rings, and tag anti-lost devices. At the same time, the company's latest BES2800 chip integrates Wi-Fi 6 based on the 6nmFinFET process. The single chip integrates multi-core CPU/GPU, NPU, high-capacity storage, low-power Wi-Fi, and dual-mode Bluetooth, which can provide powerful computing power and a high-quality seamless connection experience for wearable devices. The chip has now been introduced in several customers' headsets, smartwatches, smart glasses and other projects, and is expected to gradually start increasing in the second half of the year.

Wireless short range communication technology continues to evolve. The layout of Starflick/ANT+ In the first half of 2024, the company continued to evolve in the field of wireless short range communication, including Starflick/ANT+ technology. The company's next-generation chips support the StarFlash Alliance protocol, can achieve ultra-low latency in microseconds, support higher wireless transmission rates such as 8 Mbps, and support the protocol's error-correction code technology, which can guarantee the stability and reliability of data transmission in complex electromagnetic environments. The company's next-generation chips also support the ANT+ protocol. ANT+ is widely used in the field of sports and fitness. The company's wearable chips can be well suited to low-power sports monitoring devices from many sports brands, including Garmin, and are suitable for ultra-low power consumption and lightweight terminal scenarios.

Profit forecasting

The company's revenue for 2024-2026 is 3.204, 4.095, and 5.036 billion yuan, respectively, and EPS is 2.93, 4.45, and 5.96 yuan respectively. The current stock price is 49.7, 32.8, and 24.5 times PE, respectively. As demand for downstream smart wearables continues to grow and the mass production and launch of the company's ultra-low power consumption products, its core competitiveness will continue to increase and maintain a “buy” investment rating.

Risk warning

Macroeconomic risks, risk of product development falling short of expectations, risk of increased industry competition, risk of downstream demand falling short of expectations.