occurrences

On October 29, the company disclosed its report for the third quarter of 2024. The company achieved revenue of 0.502 billion yuan in the third quarter of 2024, up 7.7% year on year, and attributed net profit of 0.081 billion yuan, up 57% year on year.

Key points of investment

Major customers have finished their inventory, and professional videos have resumed. In the field of professional video processing, the company continues to lead the market with advanced technology and design capabilities. Follow professional video processing chip industry trends and provide customers with intelligent security algorithm support and a full set of chip solutions. The share of the company's high-end products gradually increased in the third quarter, but due to the economic background, demand for high-end products was not high, so the pace was not fast. Low-end products are the company's basic market and need to continue to be maintained. Seizing opportunities from high-end products and new product lines, such as industrial vision products, can increase revenue share.

Intelligent physics is actively deployed, and AI glasses are looking forward to the next frontier. In the field of smart IoT, the company continues to iterate and upgrade products in line with market demand, and implemented in daily electronic products such as smart door locks and home surveillance cameras based on image recognition. The company cooperated with leading consumer electronics companies to launch a series of visual products for home use, leading the market with the advantages of low power consumption, ultra-high definition, and high stability. The growth of innovative businesses of major customers is not slow, with growth rates between 20% and 60%. In particular, in fields such as smart homes, it has achieved the highest global shipment volume, showing strong competitiveness. AI glasses could be the next frontier, and the market space is huge. The current Meta solution using Qualcomm chips is more expensive, and a more affordable solution may be needed in the future. The company has direct opportunities in high-resolution, low-power IPC chips. Due to high technical requirements, competition is mainly focused on leading vision chip companies.

The front-end market is growing rapidly, with a comprehensive layout of multiple products. In the field of smart vehicles, the company's next-generation in-vehicle ISP products have been further improved in terms of interface speed and chip performance. They are more adapted to the requirements of clarity, accuracy, and response rate of new energy large-screen models, and can also cover various in-vehicle camera applications such as reversing, surround view, driver monitoring, cockpit monitoring, and streaming media cameras. The company has passed AEC-Q100 and ISO 26262 automotive functional safety certifications, established a complete automotive grade chip development and quality management system, and automotive chips have entered the supply chain system of many well-known automotive vision manufacturers. The automotive business, especially the automotive front-end component, is expected to grow significantly due to the release of ISP second-generation products.

Investment advice

We expect the company to achieve revenue of 1.85/2.1/2.4 billion yuan in 2024/2025/2026, and realized net profit of 0.26/0.31/0.41 billion yuan respectively. The current stock price corresponding to 2024-2026 PE is 41 times, 35 times, and 26 times, respectively, maintaining a “buy” rating.

Risk warning

Technological innovation risk; risk of high customer concentration; management risk; risk of rising labor costs for R&D personnel; risk of impairment of goodwill.