Jingfeng Mingyuan released its report for the third quarter of 2024: in the third quarter of 2024, the company achieved operating income of 0.353 billion yuan, a year-on-year increase of 17.51%; realized net profit attributable to shareholders of listed companies -0.024 billion yuan, a year-on-year decrease of 143.82%; realized net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss of -0.005 billion yuan, a year-on-year decrease of 108.68%.

Key points of investment

The product structure continues to be optimized to actively develop the second growth curve. In the third quarter of 2024, the company's sales revenue increased 17.51% year on year. Among them, the company continued to consolidate the LED lighting power chip market share. LED lighting power supply chips achieved sales revenue of 0.199 billion yuan, while actively developing the second growth curve. AC/DC power chip sales revenue was 0.064 billion yuan and motor control driver chip sales revenue was 0.076 billion yuan, accounting for a continuous increase in the overall business. In addition, DC/DC power chips were successfully mass-produced based on the 40V BCD process platform, and sales revenue gradually increased.

Gross margin has been rising steadily. After excluding share payment fees, the overall gross profit margin of the company's main business products was 37.52% year-on-year, up 13.58 percentage points year-on-year. This was due to a combination of factors such as technological iteration of the company's mature market products, an increase in revenue share in the second curve with high gross margin, and a decrease in supply chain costs.

The company achieved net profit to mother of -0.054 billion yuan in the first three quarters, with a year-on-year increase of 55.32%. Among them, net profit to mother was -0.024 billion yuan in the third quarter, a year-on-year decrease of 143.82%. Due to the failure to meet performance assessment targets, the company recovered 0.176 billion yuan in share payment fees. After excluding share payment fees, net profit to mother decreased by 85.10% year-on-year in the first three quarters, and a year-on-year loss of 87.48% in the third quarter.

It is proposed to acquire Yichong, Sichuan, and the advantages of business synergy complement each other

The company recently plans to purchase control of Sichuan Yichong Technology Co., Ltd. by issuing shares, issuing targeted convertible corporate bonds, and paying cash, while also raising supporting capital. Established in 2016, Sichuan Yichong, the proposed merger and acquisition, is a wireless charging chip and solution service provider. Its main products are wireless charging chips and smart hardware. Its main customers include many well-known companies from Europe, America, Japan, South Korea, and China. Its wireless charging solutions have been used by companies such as Toyota, Google, Microsoft, Sony, Zebao, and Haier, and is expected to form a business synergy with the company's existing product line after the acquisition.

Profit forecasting

Based on prudential considerations, without considering the impact of the acquisition on the company's performance, it is predicted that the company's revenue for 2024-2026 will be 1.541, 1.902, and 2.394 billion yuan, respectively, and EPS will be -0.17, 1.22, and 2.41 yuan, respectively. The current stock price corresponding to PE is -617, 86, and 44 times, respectively. As the recovery of the LED industry's prosperity in 2024 fell short of expectations and industry competition intensified, the company's sales volume of general LED lighting products fell short of the decline in the unit price of the product, and profits were under pressure, so we lowered our profit forecast for 2024.

Since 2024, the company has continued to adjust its product sales structure, while introducing next-generation processes in batches has led to cost reductions, gross margins have continued to be repaired, profitability has continued to improve, and maintain an “increase” 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, risk of mergers, acquisitions and restructuring, risk of acquisition progress falling short of expectations, and risk of poor post-acquisition synergy.