Introduction to this report:

Price competition in the RF sector is gradually bottoming out. Driven by major customers, 4G and 5G products are expected to be rolled out on a large scale to reverse the difficult situation.

Key points of investment:

Maintaining the “Overweight” rating, the target price was lowered to 18.24 yuan. The company is a leading supplier of RF modules. Driven by customers from brands such as mobile phones and the Internet of Things, its performance is expected to rebound.

Considering that the results for the first three quarters of 24 fell short of expectations, it revised its 24-year revenue to 0.558 billion yuan, downgraded 25-year revenue to 1.295 billion yuan, and added 26-year revenue of 2.292 billion yuan (original 24-25 revenue of 1.108/1.57 billion yuan); downgraded its 24-year EPS to -0.85 yuan, downgraded 25-year EPS to 0.01 yuan, and added a 26-year EPS of 0.48 yuan (original value 24-25) Annual EPS is -0.25/0.23 yuan). Its L-pamid products have been mass-produced on a small scale and are expected to be introduced to brand customers at an accelerated pace. Considering that the semiconductor design industry's average valuation in '26 was 38 times PE, it will be given 38 times PE in 2026, and the target price will be lowered to 18.24 yuan.

Price competition in the RF sector is gradually bottoming out. Driven by major customers, 4G and 5G products are expected to be rolled out on a large scale to reverse the difficult situation. The company achieved revenue of 0.1303 billion yuan in 2024Q3, -13% year-on-year, and -13% month-on-month; realized net profit of -0.1149 billion yuan, the biggest loss in a single quarter, mainly due to serious price cuts in the RF sector. As Tier 1 manufacturers gradually become unable to bear cash flow losses, prices begin to bottom out, and gross margins are expected to begin to improve. The company's high-end products such as 4G/5G have gradually achieved breakthroughs in Samsung, vivo, Xiaomi, OPPO and other brand clients. The overall product structure has been optimized and scaled up, and it is expected that performance will bottomed out and rebound.

The company actively promotes 5G and 4G RF module research and development. PA strength is leading domestically, and it is profoundly benefiting from domestic replacement of the RF side. ① New 5G band: Small and highly integrated n77/n79 dual-band L-PAMIF products have been released, and the developed L-FEM modules have been widely used in mobile phones and IoT modules; ② 5G reinvigorates the frequency band: developing conventional normal pressure PA and low voltage PA chips, and low frequency L-PAMID products have been mass-produced on a large scale. ③ 4G band: The company continues to iterate on 4G MMMB PA products and continues to launch higher performance and more cost-effective products.

Catalysts: More brand customer breakthroughs; L-pamid product breakthroughs.

Risk warning: The downstream recovery falls short of expectations; the competitive landscape of the industry deteriorates.