occurrences

On October 26, 2024, Pran Co., Ltd. announced its report for the third quarter of 2024. The company achieved operating income of 1.37 billion yuan in the first three quarters, an increase of 78.1% year on year, achieved net profit due to mother 0.22 billion yuan in the first three quarters, an increase of 321.3% year on year, and achieved net profit deducted from non-mother 0.23 billion yuan in the first three quarters, an increase of 305.1% year on year. Corresponding to 3Q24, the company's revenue for the single quarter was 0.47 billion yuan, up 57.6% year on year, down 4.2% month on month, net profit for the single quarter was 0.089 billion yuan, reversing losses year on year, up 3.1% month on month, and net profit without return to mother for the single quarter was 0.076 billion yuan, reversing losses year on year and down 15.3% month on month.

The storage cycle is over and we have entered a period of steady growth

Pran Co., Ltd.'s revenue for 3Q24 in a single quarter was 0.47 billion yuan, up 57.6% year on year, down 4.2% month on month; gross profit margin was 32.6%, up 6.7 pct year on year, down 2.7 pct month on month; R&D expenses continued to be high in the single quarter, up 18.9% year on year, up 1.1% month on month; net profit from single quarter to mother was 0.089 billion yuan, reversing losses year on year, up 3.1% month on month. Net profit after deducting non-return mother's net profit of 0.076 billion yuan in the single quarter. The year-on-year loss was reversed, and the month-on-month decrease was 15.3%.

The company's performance since this year has been strong. On the basis of reflecting market recovery, it has fully demonstrated its alpha attributes. From a quarterly perspective, although the month-on-month trend of the company's 3Q24 revenue fluctuated, starting from the company's main downstream AIoT related markets, we can still see the emergence of innovative products. In particular, driven by AI, we think the future demand of the AIoT market is worth looking forward to, which in turn will drive the growth of the company's storage+MCU business lines. Taking wireless headphones as an example, we can see the explosion of open headphones in 2023. Headphones supported by AI will be launched in 2024. For example, recently Byte's Oladance launched the AI open headphone Ola Friend, which focuses on the voice interaction function of the big Beanbag model.

Pran Co., Ltd. has gradually reached the front of the market in the NOR Flash field. The low cost advantage with the support of the SONOS process is remarkable, and when the ETOX process product line is completed, the company is expected to benefit to a greater extent when innovative AIoT terminal products are implemented and demand is generated. In the MCU field, the company is still in the product line and market expansion stage, and it is expected that the expansion of the product line and customer line will support the high growth rate of this business.

Investment advice

We have updated the company's profit forecast for 2024-2026. The net profit for 2024-2026 is 0.3, 0.33, 0.39 billion yuan (the original forecast in the previous report 2024-2026 was 0.2, 0.25, 0.31 billion yuan), corresponding EPS was 2.86, 3.10, and 3.70 yuan/share, corresponding to the company's closing price on October 30, 2024, PE was 29.3, 27.0, 22.6 times, maintaining the “gain” rating.

Risk warning

Market recovery fell short of expectations; product prices fell short of expectations; cost side control fell short of expectations.