In 2024, the company achieved revenue of 3.386 billion yuan (yoy: +30.23%), net profit to mother of -0.693 billion yuan (loss increased 37.01% year-on-year). Revenue and profit were lower than our previous expectations (3.504/-0.518 billion yuan), mainly due to the fact that the mobile SoC project implementation progress was slightly lower than expected and affected the release of performance. 4Q24 achieved revenue of 0.846 billion yuan (yoy: +11.94%, qoq: -4.34%) and net profit of -0.281 billion yuan (loss increased 252.90% year over year and 89.86% month-on-month). Demand for downstream applications such as wearables, vehicle networking, mobile broadband devices, and location tracking was strong in 2024, and the company's market share in the global Cat.1 and Cat.4bis fields increased, driving chip sales +44.05% year-on-year. However, due to increased share payment fees ($0.011/0.18 billion in 23/24), compounded non-recurring profit and loss decreased by 0.138 billion yuan compared to last year, and increased asset/credit impairment losses, the 24-year loss margin increased year-on-year. We are optimistic about the company's active development in the mobile phone/wearable/chip customization market and maintain a “buy” rating.
2024 review: Cellular IoT market share remains leading, gross margin has stabilized by business segment: 1) Chip products (24-year revenue: 3.014 billion yuan, yoy +34.17%): Among them, cellular baseband chip/ non-cellular baseband chip revenue was 2.809/0.205 billion yuan, up 35.10%/22.66% year on year. The company's share in the global Cat.1 sector was close to 50% in '24, and Cat.4 shipments also achieved 100% year-on-year growth, Cat.7 Brand customers including ZTE have been successfully introduced; 2) chip customization (24-year revenue 0.336 billion yuan, yoy +48.38%), and next-generation high-end products from multiple customers have entered mass production; 3) IP licensing (24-year revenue 0.035 billion yuan, yoy -71.44%). The main reason for the year-on-year decline is that some projects are still in the project implementation period, and new upgraded IPs are being introduced by customers. Market competition stabilized in '24, and the gross margin of the company's chip products increased by 0.48pct to 20.32% year-on-year. At the same time, the company maintained high manpower efficiency. The number of R&D personnel in 24 years was 1,138, which remained stable over the same period last year (23:1135).
Prospects for 2025: Mass production of 8-core 4G smartphone chips is imminent. In addition to continuing to deeply cultivate the 4G cellular IoT market and actively seize 5G redcap upgrade opportunities, it is recommended to focus on: 1) Mobile phones: the first LTE octa-core smartphone chip platform and the first 5G RedCap SOC smartphone chip platform were launched at the end of 24. The former will complete the first batch of customer design-ins at 1H25 and achieve mass production within the year; 2) Smart wearables: the company's smart wearable products have already been covered There are more than 100 brand customers, and the product system is expected to be rich; 3) Vehicle networking: front-end market expansion is accelerating; 4) Chip customization business: it has served artificial intelligence companies, large Internet technology companies, large storage companies, leading RISC-V solution providers, etc., and the revenue contribution will increase significantly.
Investment recommendation: The target price is 91.5 yuan. Maintaining the “purchase” rating considering mobile SoC is still in the development stage. We are cautious about volume expectations and lower this portion of revenue. The estimated 25/26/27E revenue is 4.398/5.602/6.723 billion yuan (compared to the previous value: -3%/-14% /-). We are optimistic that the company will continue to cultivate the cellular Internet of Things and actively develop the mobile phone/wearable/chip customization market, giving 8.7 times 25PS (consistent median expectation of 25PS) 8.7x), target price 91.5 yuan (previous value: 65 yuan, corresponding to 6x 25PS), maintaining the “buy” rating.
Risk warning: Product development falls short of expectations, market competition intensifies, and customer introduction falls short of expectations.
