Incident: The company released its annual report for the year 24, achieving revenue of 3.386 billion yuan, an increase of 30.23% over the previous year; achieved net profit due to mother of -0.693 billion yuan, a year-on-year decrease of 37.01%, and realized net profit deducted from non-mother of -0.707 billion yuan, a year-on-year decrease of 7.38%. In the 24Q4 single quarter, the company achieved revenue of RMB 0.846 billion, an increase of 11.94% over the previous year, and achieved net profit to mother of RMB -0.281 billion, a year-on-year decrease of 252.9%.

Products continue to be upgraded and iterated, increasing market development to drive revenue growth. The company continued to maintain a strong development trend in the chip business in 2024. On the one hand, relying on long-term deep cultivation and technology accumulation in the field of cellular baseband chips, we continue to promote chip product iteration, making the product range more and more remarkable; on the other hand, we have continued to increase our market development efforts, especially successfully achieving breakthroughs in some segments of the cellular Internet of Things, which led to a sharp rise in chip sales, which ultimately led to a significant increase in the company's overall revenue compared to the same period last year. The company's three main business segments, chip products, chip customization business, and semiconductor IP licensing, accounted for 89.02%, 9.92%, and 1.04% of the main business revenue, respectively.

R&D costs are high, and the development of new products continues to advance. In 2024, the company will continue to invest heavily in R&D, and continue to accumulate and innovate technology in various wireless communication fields such as cellular and non-cellular. In 2024, the company invested about 1.242 billion yuan in R&D, accounting for 36.68% of revenue. A total of 18 R&D projects were invested in 2024, of which 4 were newly established and 6 were successfully completed; 12 R&D projects including 5G smartphone SOC chips, 5G lightweight smart terminal chips, and 4G smartphone chips are progressing in an orderly manner. The company's continuous and stable investment in large R&D ensures rapid product upgrades, forward-looking technical research, and multi-level product layout.

The chip customization business is growing at a high rate, covering leading AI companies. The company provides one-stop chip customization solutions with mature large-scale chip design capabilities, rich experience in large-scale chip design service projects, strong software and hardware support capabilities, and flexible and diverse full-process integrated solutions. It serves a wide range of enterprises, covering leading artificial intelligence companies, large Internet technology companies, large-scale storage companies, leading RISC-V solution providers, industrial control companies, etc. The company actively expanded new customers and new projects, and the revenue from the chip customization business reached 0.336 billion yuan, an increase of 48.4% over the previous year.

Investment advice: The company continues to make breakthroughs in certain cellular IoT market segments, and is expected to accelerate performance growth; however, due to the impact of increased R&D investment, we adjusted the original forecast of the company's net profit to mother of -0.0026 billion yuan in 25 and added a 26/27 forecast; the company is expected to achieve net profit to mother of -0.33/0.06/0.199 billion yuan in 25-27, maintaining a “buy” rating.

Risk warning: risk of technology upgrades and product iterations falling short of expectations; risk of core technology leakage; risk of falling short of expectations; risk of not being profitable