Matters:
The company released its report for the first quarter of 2024:
24Q1 achieved operating income of 363 million yuan (yoy +18.19%, qoq -8.65%), net profit of 55 million yuan (yoy +11.07%, qoq +0.81%), and net profit of 46 million yuan after deducting non-return to mother (yoy +24.27%, qoq +27.93%).
Commentary:
Revenue performance in the single quarter remained strong, with non-net interest rates remaining high. The 24Q1 company achieved sales revenue of 363 million yuan, yoy +18%, and qoq -8.7%. Affected by the low consumption season, the Spring Festival holiday and India's Ramadan, there was a slight decline from month to month, and continued to increase year-on-year under the high base of 23Q1. In the context of consumer market recovery, the company remained strong with excellent product strength and channel sales capabilities. The company's 24Q1 gross profit margin was 20.43%, +0.85pct year over year, and -1.01 pct month-on-month. High-end chips fluctuated greatly due to the off-season. Product structural factors caused quarterly fluctuations in gross margin. With the arrival of the peak consumer season and the successive introduction of new products in the Cybertron series, gross margin is expected to pick up. 24Q1 deducted a non-net interest rate of 12.62%, +0.62 pct year over year, and +3.61 pct month-on-month (considering 23Q4 charges, 24Q1 was 0.6 pct higher than the overall 12.02% in 23), and the cost control capability was outstanding.
High-end markets continue to penetrate, and emerging markets are actively expanding. The company is one of the leading suppliers of wireless audio SoC chips and has strong market competitiveness. By the end of '23, the company launched the BT889X, BT892X, BT893X and BT895X series of high-end Bluetooth chips. Baidu added an AI tablet robot speaker equipped with the CyberDragon third-generation BT8961B chip to achieve AI voice interaction. Currently, Cybertron products have entered the supply system of well-known terminal brands such as Xiaomi, Magic, Realme, Beissy, Rambler, Tencent QQ Music, Voice, Magic Blue, Philips, NOKIA, Motorola, Lenovo, Iron Triangle, Himalaya, BoT, Noise, Walmart, iFLY, TCL, etc. In 2023, the CyberDragon series accounted for 14%-15% of revenue. In 24, the company will continue to deeply cultivate the brand customer market and continue to drive brand penetration. At the same time, given the rationalization of global electronics consumption trends, demand for cost-effective products is resilient, and the market space of the Indian market and other potential countries such as Indonesia, Africa, Mexico, and Egypt is still worth looking forward to.
Increase R&D investment & expand product lines to enhance market coverage and product competitiveness. The company will continue to increase investment in R&D, enhance product planning capabilities, technical pre-research capabilities, and improve project management. Technically, we will continue to explore communication technologies such as Bluetooth and Wi-Fi, and have successively launched CyberDragon 2+, Cybertron 4th generation, and Wi-Fi chips to quickly respond to market needs, and continue to launch competitive solutions. At present, the company has formed eight major product lines, including Bluetooth headphone chips, Bluetooth speaker chips, smart wearable chips, wireless microphone chips, digital audio chips, toy voice chips, AIoT chips, and AI voice recognition chips, which have enriched downstream application scenarios and customer groups. Many new products are expected to gradually launch during the year, contributing to sales revenue.
Investment advice: We expect the company's revenue in 2024-2026 to be 1,890/24.00/2,977 million yuan, net profit to mother of 3.20/4.34/526 million yuan, and corresponding EPS of 2.66/3.61/4.38 yuan. Referring to comparable company valuations, the company was given a 24-year, 30-times PE valuation, corresponding to a target price of 79.9 yuan, maintaining a “strong” rating.
Risk warning: Downstream demand falls short of expectations, new product development and market development fall short of expectations, risk of falling inventory prices