2Q24: Demand for IoT RF chips is picking up, and the performance of the mobile phone market is relatively lackluster

In 2Q24, the company achieved revenue of 0.149 billion yuan (yoy: +16.29%, qoq: +41.74%), net profit of 0.102 billion yuan (year-on-year loss of 0.008 billion yuan, month-on-month increase of 0.021 billion yuan), net profit after deducting non-attributable net profit of 0.107 billion yuan (year-on-year loss of 0.01 billion yuan, month-on-month increase of 0.014 billion yuan). 2Q24's revenue achieved year-on-year growth, mainly due to: 1) the recovery in demand in the domestic Android phone market and the increase in demand from IoT customers; 2) the company continued to increase the penetration rate of brand customers, and the year-on-year increase in product shipments. Due to intense market competition and pressure on product prices, the company's 2Q24 gross margin was only 1.86% (yoy:

-8.83pct; qoq: -6.11pct), compounded the impact of increased asset impairment losses, leading to a month-on-month increase in 2Q24 losses. Considering the slow recovery in demand for Android phones and short-term price pressure, we lowered the company's 24/25/26 revenue to 0.61/0.84/1.17 billion yuan (original value: 0.7/1.04/1.47 billion yuan), considering that the company's market share in Android brand mobile phone customers is expected to gradually increase with the launch of new products, giving 7.5x24PS (industry average value 4.6x 24PS), target price 10.0 yuan, maintaining the “buy” rating.

2Q24 review: 4G product revenue grew rapidly year on year, and competition continued to put pressure on 1H24. The company's 4G/5G revenue was +45.4%/-13.3% year over year to 0.095/0.158 billion yuan, respectively. The company continued to seize 4G market share, and its revenue share increased 10.16 pct to 36.67% year over year. In terms of gross margin, 2Q24's gross margin was only 1.86% (yoy: -8.83pct; qoq: -6.11pct), mainly due to intense market competition and changes in product structure. By product, 1H24 5G products have a gross profit margin of 2.78% (23 years: 15.86%), and price competition for products such as LFEM and Phase5N is fierce; 4G gross profit margin is 7.05% (23 years: 5.09%). The improvement in 4G gross margin is expected to mainly benefit from the launch of next-generation products and the increase in IoT revenue contribution. On the cost side, the company continues to strengthen cost control. 2Q sales, management and R&D expenses totaled 0.107 billion yuan, and the cost ratio was 71.78% (yoy: -20.5pct, QoQ: -17.8pct).

2024 outlook: Large-scale mass production of L-pAMID is imminent. Focus on the introduction and penetration of mobile phone brand customers. Since the company's revenue volume is still small, revenue is greatly affected by factors such as customer project planning/delivery pace, we expect the company's revenue to exceed 0.6 billion yuan in 24. The driving forces include: 1) L-pamid products continue to advance in customer verification and introduction of mobile phone brands, and large-scale mass production is expected to begin in the second half of the year; 2) New products such as 5G L-pamiF and 5G MMMB PA modules that support low-voltage PC2 and high-power 5G MMMB PA modules Further strengthening competitiveness is expected to accelerate the penetration of the company's domestic and foreign mobile phone brand customers; at the same time, a new iteration of high-performance and more cost-effective 4G MMMB PA module products will gradually be launched to help the company maintain its competitive advantage in the 4G long-tail market; 3) Successfully launch WiFi FEM modules to further open up market space.

Investment advice: Target price of 10.0 yuan, maintaining the “buy” rating. We downgraded the company's 24/25/26 revenue to 0.61/0.84/1.17 billion yuan (original value: 0.7/1.04/1.47 billion yuan). Considering that the market share of Android brand mobile phone customers is expected to gradually increase with the launch of new products, we will give 7.5 x 24PS (industry average value 4.6 x 24 PS), target price 10.0 yuan, “buy” rating.

Risk warning: Downstream demand is recovering slowly, market competition is intensifying, and technology upgrades and iterations fall short of expectations.