Incidents:

On December 10, 2024, the company issued an announcement: China Mobile announced the candidates selected for the “China Mobile 2024-2026 Centralized Procurement of Smart Set-top Box Products (Open Procurement Section)”. The company is the selected candidate for the above projects. Expected bid package 1:4K set-top box (17.39% share); purchase package 2:8K set-top box (17.00% share); estimated total bid amount: 1.208 billion yuan (tax included).

Key investment points:

Operators accelerate the development of smart home services, and the company's operator channel advantages are evident

According to the tender notice, the procurement content for this project is 56.1681 million smart set-top boxes. Among them, 4K set-top boxes are 54.8973 million, and 8K set-top boxes are 1.2708 million. Operators have accelerated the development of smart home services and have become a new engine of growth. This collection of 8K set-top boxes means that IPTV will usher in a new round of upgrades. In July of this year, China Telecom launched the 2024-2025 IPTV smart set-top box product collection, including 4K set-top boxes and 8K set-top boxes, with a total procurement scale of 20.32 million units.

Jiulian is mainly committed to improving and enriching home network communication and home multimedia entertainment. Related products have covered a series of digital home core devices such as smart home network access devices, network management equipment, and multimedia information terminals. The company has significant advantages in terms of operator channels. In March of this year, it won the bid for 4 procurement packages for Mobile's “2024-2025 Smart Home Gateway Product” project, totaling 11.6838 million units, with an estimated total bid amount of 1.149 billion yuan (tax included).

Hongmeng's software and hardware ecosystem collaborative layout and 0.1 million+ applications help Hongmeng move to the next stage

The company continues to increase investment in R&D of new products such as Hongmeng ecology and robots. Hongmeng Ecological Company has products such as development boards, distributors, and terminal devices (edge computing devices, set-top boxes, routers, cameras), etc., and has launched more than 40 commercial products, covering standard, small and lightweight devices. Currently, tens of millions of devices have been delivered for use. In 2023, the company was upgraded to an OpenHarmony Project Group Class A donor and ranked fourth in total code contributions as of January 19, 2024.

As of October 2024, the Hongmeng ecosystem has covered 18 vertical fields and has completed the development of more than 0.015 million native applications and meta-services. Huawei stated that the key goal of Hongmeng Ecosystem is to reach 0.1 million applications in the next six months to one year.

Cooperate with the Academy of Information and Communications Technology to launch cryptographic products that have quantum attack resistance and have already been commercialized

The ICT Guardian launched by the company and the Institute of Information and Communications Technology has been commercialized. ICT Guard is a professional cryptographic product for G-side work and trade secret protection. It is suitable for all Hongmeng, Android and iOS phones and tablets, and is suitable for all OA tools (such as DingTalk, Panmicro, etc.), IM tools (such as WeChat, Meta, etc.), email, etc., and can be used worldwide. Furthermore, the core technology system of ICT Defender has enhanced technical solutions and strengthened technical systems for quantum computing characteristics, and has quantum attack resistance. In the future, it will continuously optimize and improve the security performance of ICT Defender in accordance with the requirements of relevant national and international standards and the development of quantum technology.

Profit forecast and investment rating: In November 2024, the company received a 1.2 billion yuan order from China Mobile, and the smart terminal business is expected to recover rapidly; at the same time, the company is deeply involved in the construction of Hongmeng's ecological industry and continues to promote product connectivity and industry deepening. We expect the company's revenue for 2024-2026 to be 2.839/3.621/4.612 billion yuan, respectively, net profit to mother of 0.011/0.162/0.254 billion yuan, EPS 0.02/0.32/0.51 yuan/share, respectively. Corresponding to 2025-2026 PE is 37/24X, respectively, maintaining an “gain” rating.

Risk warning: Macroeconomics affects downstream demand, market competition intensifies, Sino-US games intensify, IoT industry development falls short of expectations, and orders from major customers fall short of expectations.