Incidents:

The company released a performance forecast for the first three quarters of 2024. In the first three quarters of 2024, the company expects to achieve operating income of 2.16 billion yuan, a year-on-year increase of 48.50%; net profit to mother 0.34-0.36 billion yuan, up 339.75%-365.62% year on year; net profit after deducting non-return to mother of 0.33-0.35 billion yuan, an increase of 396.86%-426.98% year on year. Among them, the company expects to achieve revenue of 0.911 billion yuan in the third quarter, up 51.42% year on year and 29.18% month on month; net profit to mother is 0.157-0.177 billion yuan, up 199.39%-237.47% year on year, and 36.57%-53.95% month on month.

Comment:

AIoT product lines have fully blossomed, and Q3 revenue reached a record high. The AIoT market continues to expand, smart products are becoming more diverse, and it is expected to continue to grow rapidly in the next few years. The company's demand for various AIoT product lines grew in groups in the first three quarters of 2024, net profit increased dramatically, and the cost control effect was remarkable. At present, the company's AIoT chip “Geese Phalanx” platform layout has basically taken shape; NPU's advantage in implementing AI algorithms has promoted the continuous increase in the company's share of multiple AIoT product lines; new products such as RK3576, RK2118, and RV1103B have been rapidly introduced to leading customers in target fields, forming new increments and will continue to release incremental value. Relying on the continued growth of the company's AIoT, compounded by the industry's traditional peak season in the third quarter, the company's performance increased dramatically.

The platform-based layout preempts end-side AI, and the increase in flagship chips continues to unleash growth momentum. Since this year, advancements in end-side AI products have been in full swing, and products such as Beanbag headphones and Meta-Rayban have been launched one after another. The company is deeply involved in end-side AI. The product covers different computing power specifications from 0.2 TOPs to 6 TOPs, and the running speed of models with mainstream 2B parameters on the end side can reach more than 10 tokens per second. In March 2024, the release of RK3576, a new generation of advanced high-end intelligent application processors, and RK2118, a new dedicated AI audio processor, marked the company's technological breakthroughs and application expansion in various scenarios such as smart cockpits, large interactive screens, and tablets. Product lines represented by RK3588, RK356X, and RV1103/1106 will continue the sales trend in the first half of the year, and new products such as RK3576 and RK2118 will gradually form new growth points in the second half of the year. At present, the number of mass production customers and projects of the RK3588 is increasing, and has entered a period of rapid growth; after the launch of the RK3576 in the first half of the year, the products of leading customers in some target scenarios have now entered the mass production stage, demonstrating the company's leading position and innovative ability in the field of AI audio technology, and is expected to continue to contribute to growth as new products continue to be released in the future.

Profit forecast and investment rating: We expect the company to achieve net profit to mother of 0.512/0.721/1.009 billion in 2024/2025/2026, respectively, corresponding PE of 61/43/31 times, to maintain a “buy” rating.

Risk warning: downstream demand falls short of expectations, industry competition intensifies, customer introduction falls short of expectations