occurrences

The cumulative revenue for the first three quarters was 1.46 billion, an increase of 42.17% year over year.

Key investment points

Ai-enabled products embrace the Internet of Things era. The processor is the core component. It continues to evolve according to the complexity of the customer's application scenario, and the connection will be used as a match. For the IoT market, a processor with connectivity is just what is needed. This is the company's insight into its own industry. Based on this insight, the company plans all products. The company's ESP32-S3 and ESP32-P4 product lines all have the ability to add edge AI, which is mainly reflected in device-side voice wake-up and control, and image processing functions. These two series of chips add AI acceleration instructions to the hardware design; at the software level, they also provide solutions such as image recognition, voice wake-up, and control.

Overseas exports continue to be strong, and R&D investment continues to improve. Direct overseas sales increased 25.99% month-on-month, and direct domestic sales decreased 6.70% month-on-month; while Q2 compared with Q1, direct overseas sales increased 21.13% month-on-month, and domestic sales increased 44.00% month-on-month, greatly exceeding the overseas growth rate. The cost side is mainly R&D expenses, which account for 78.18% of all expenses. The cumulative R&D expenses for the first three quarters increased 19.06% year over year. Typically, Q3 is a peak for new hires to be hired, and costs increase month-on-month. The number of R&D personnel at the end of this period was 542, an increase of 10.61% over the previous year. About half of this number came from recruiting new students last year.

Investment advice

We expect the company to achieve revenue of 2/2.6/3.3 billion yuan in 2024-2026, and realized net profit of 0.34/0.44/0.6 billion yuan respectively. The current stock price corresponding to 2024-2026 PE is 45 times, 35 times, and 25 times, respectively, maintaining a “buy” rating.

Risk warning:

Market demand falls short of expectations; new product development and market expansion fall short of expectations; market competition intensifies, etc.