Incident: The company released its 2024 annual report, achieving revenue of 3.386 billion yuan, yoy +30.23%, net profit due to mother - -0.693 billion yuan, yoy -37.01%, net profit not attributable to mother - -0.707 billion yuan, yoy -7.38%.
The business trend is gradually improving. The company's 24Q4 revenue was 0.846 billion yuan, yoy +11.94%, qoq -4.34%, net profit to mother -0.281 billion yuan, yoy -252.9%, qoq -89.86%, net profit excluding non-return to mother -0.231 billion yuan, yoy -87%, qoq -31.85%; gross profit margin 22.39%, yoy-1.2pct, qoq+0.45pct. Profit apparently accelerated losses; in reality, operating profit losses narrowed after deduction due to an increase in impairment expenses (credit impairment, asset impairment charges of 0.106 billion yuan, fair value change loss 0.069 billion yuan), and the trend is positive. The company's R&D expenses in 24 years were 1.24 billion, and the R&D fee rate fell below 40% for the first time, 43% in 23, and a decrease of 6.3 pct in 2024. As the scale of revenue starts, IC design flexibility will gradually become apparent.
The prospects for steady advancement of mobile SoC are huge, and AI on the beneficiary side of the Internet of Things is basically oriented upwards. The company is a scarce smartphone SoC manufacturer in China, with high industry barriers and large market space. According to IDC data, global smartphone shipments reached 1.24 billion units in 2024, a year-on-year increase of 6.4%, and there is a large market space. Currently, mainstream smartphone SoC manufacturers in the world include Qualcomm, MTK, Ziguang Zhanrui, etc. Among them, Qualcomm fully covers the 5G market. The 4G market is mainly MTK and Ziguang Zhanrui. The company's first 4G mobile phone chip in 2024 has been successfully shipped to the Latin American market. According to incomplete statistics, at least 5 smartphones have used this chip so far, and there are also models and new customers in the process of promoting it. Furthermore, the company is actively promoting 5G smartphone chip research and development, and plans to launch 5G RedCap smart terminal chips in 2025 and 5G smartphone SOC chips in 2026, which have both growth potential and scarcity.
In the era of end-side reasoning, customized ASICs are expected to explode. The AI model is at a critical stage of training and inference, and the global company Capex continues to improve, and the long-term growth trend of computing power remains unchanged: 1) Overseas: CSP such as Google, Amazon, Meta, and Microsoft are all expected to maintain high investment in AI; 2) Domestic: Ali is the first to announce results. The results will indicate that the Group's investment in cloud and AI infrastructure over the next three years is expected to exceed the sum of the past 10 years, and the demand for computing power is huge. DeepSeek reduces model training costs and downstream application costs, and will accelerate the shift of large companies' resources to inference requirements. ASICs are optimized for specific uses and have lower power consumption compared to GPGPU architectures. In addition, cutting redundant units greatly improves chip efficiency, and the proportion is expected to gradually increase. The company's R&D team has deep technical accumulation and mass production experience in system architecture, signal processing, communication protocol stacks, and digital, analog and RF circuit design, and is leading in customized ASIC capabilities in the country. As domestic Internet vendors continue to increase capital expenditure investment and demand for customized ASIC inference cards increases, the company is expected to benefit deeply.
Investment advice: Considering that the company is a scarce target in the domestic baseband communication chip field, we expect the revenue for 2025/2026/2027 to be 4.52/6.195/7.519 billion yuan, corresponding to PS of 8/6/5 times. We believe that the company, as a leading company in domestic mobile phone baseband chips, has significant advantages in terms of technology and customers, giving it a “buy” rating.
Risk warning events: New product development progress falls short of expectations, risk of deteriorating competitive landscape, risk of lagging data and information
