Tailingwei is a leading supplier of Bluetooth chips in China. It has rich downstream scenarios and strong technical strength. Established in 2010, Tailingwei specializes in R&D, design and sales of wireless IoT system-level chips. Its products mainly include BLE chips, 2.4GHz private protocol SoC chips, multi-mode SoC chips, ZigBee protocol SoC chips, and Bluetooth audio chips. The company's downstream covers consumer and commercial IoT applications such as smart retail, consumer electronics, smart home, smart medical care, warehousing and logistics, audio entertainment, etc. The company focuses on R&D investment. The core executives all have rich work experience in the field of communication chips. In 2023, 96.8% of employees had a bachelor's degree or above.

Revenue has been relatively steady in the past two years, focusing on the high-end market, and strong profitability. 1H24 achieved revenue of 0.366 billion yuan, a year-on-year increase of 14.67%, and achieved net profit of 0.027 billion yuan to mother. In 2021-2023, the company's revenue was 0.65/0.609/0.636 billion yuan, a year-on-year change of 43.15%/-6.19%/4.40%; net profit to mother was 0.095/0.05/0.05 billion yuan, respectively, with a year-on-year change of 203.05%/-47.62%/0.01%. The company has mainly made efforts in product restructuring in the past 3 years, and since 2023, the company's revenue and net profit to mother have remained stable. Along with the improvement of the company's product structure, the company's profitability grew steadily. 2022-1H24's gross margin was 41.27%/43.50%/46.18%, respectively, showing a steady upward trend. The company is deeply involved in high-end customers and downstream, boosting overseas customers, and is expected to further increase its profitability in the future.

It has a forward-looking layout in medical, automotive, Bluetooth audio and other industries, with plenty of potential for growth. Tailingwei has strong technical advantages in the Bluetooth field and was selected as a board member company of the International Bluetooth Technology Alliance (SIG) in July 2019. While the company is deeply involved in traditional business, it is forward-looking at incremental business and emerging markets: 1) Bluetooth audio: Bluetooth audio business accounted for 7.35% of revenue in 2023, which has achieved initial results; 2) Smart healthcare: The smart medical field has large market space and strong profitability. According to QY Research, sales of continuous blood sugar monitoring systems are expected to reach $20.6 billion in 2030. Currently, RFID products equipped with Bluetooth LE chips have become the first choice for intelligent medical devices. The company has a key layout in the medical market, and the products have been successfully applied to the tracking of key medical personnel; 3) Car keys: the company develops automotive digital key technology that supports multi-node high-precision positioning based on its own low-power Bluetooth chip and protocol stack, and achieves mass production for first-line customers; 4) Joining the Apple ecosystem: Tailingwei is deeply involved in Apple Homekit ecosystem development and provides support solutions for various types of projects. Successfully penetrated into the Apple ecosystem. We believe that at present, the company has basically completed the layout of key incremental markets. With the subsequent implementation of demand for the above application scenarios, the company's performance is expected to grow rapidly.

Investment advice: We are optimistic about the company's leading position in the field of wireless IoT chips. We expect net profit to be 0.081/0.123/0.178 billion yuan in 2024-2026, corresponding to PE 48/31/22 times, respectively. Considering the company's leading Bluetooth technology layout, the downstream mainly targets the high-end market. Customer barriers are high, the downstream growth of the low-power Bluetooth IoT is strong, and the medical, home and other markets have the potential for rapid growth. It is covered for the first time, giving it a “recommended” rating.

Risk warning: the risk of downstream demand fluctuations, the risk of technological iteration falling short of expectations, and the risk of increased market competition.