Incident: On April 27, Guoguang Electric released its 2024 quarterly report. The company achieved revenue of 1,269 million yuan, an increase of 16.78% over the previous year; realized net profit of 0.29 million yuan, an increase of 307.93% over the previous year; realized net profit deducted from non-return to mother of 190 million yuan, an increase of 445.19% over the previous year.
Product structure upgrade, binding major customers to drive long-term growth. The 24Q1 company's performance exceeded expectations, mainly due to the year-on-year increase in sales volume of the company's business, an increase in the share of high-margin products, and continuous improvement in profitability. The company is deeply involved in the field of electroacoustics, with a fixed increase of 1,384 billion yuan to increase investment in smart speakers, car audio business, XR machine and acoustic module business, enhance market competitiveness, develop diversified structural product strategies, further enhance cost control capabilities and industrial chain integrity, and further stabilize its leading position in global acoustics.
Empowered by AI, traditional businesses are revitalized. The Samsung S24 sounded the trumpet of AI hardware charging. In the next few years, localized models, AI hardware, and terminal applications will rapidly resonate, bringing about a comprehensive revolution in the electronics industry. While deepening traditional business, the company is actively entering a new circuit. In August '23, Guoguang Electric released ChatMini, the world's first AI-powered smart speaker with built-in ChatGPT and Baidu Wenxin. As a light interaction method, audio is more suitable for fragmented scenarios. The generative AI model represented by ChatGPT and Wenxin has improved the interactive experience of smart speakers, and the quality of generated content has been improved to further meet the needs of users to serve customers in real scenarios. In the future, personalized and emotional interaction will gradually be realized, injecting new impetus into the development of smart speakers, and the market is expected to usher in a new round of high growth. The company has many years of technical experience in this field, and cooperation with domestic and foreign manufacturers equipped with large-scale smart speakers continues. In the future, with the development of new customer forces, the increase in stand-alone value, and the release of production capacity, the performance growth rate is expected to increase further.
Stepping ahead, vehicle+XR drives growth. 1) In-vehicle business: With the upgrading of audio systems, the number of bicycles equipped with speakers doubled, exponentially increasing from 4-8 to 20-30. Vehicle amplifier configurations have also been downgraded from high-end models to become standard, and the value of bicycle audio equipment has increased tenfold. The company focuses on developing the car audio business. It has received cooperation projects from many car companies, and has achieved continuous cooperation with some car companies to supply in-vehicle intelligent robots and large model speakers equipped with voice AI technology. 2) VR/AR business aspect: The company actively lays out the blue ocean market, has become the leading supplier of acoustic modules for VR companies at home and abroad, and has established good cooperative relationships with leading companies such as M customers and P customers. We are optimistic that MR will lead new innovations in consumer electronics. With its advantages in acoustic modules, the company is expected to follow the big customer strategy, and Vision Pro will help the next wave of consumer electronics “spatial computing” innovation.
Investment advice: We are optimistic that while the company is deeply involved in the traditional acoustics business, it will actively enter a new circuit. In the future, along with new customer breakthroughs, the company's smart speaker, automotive and XR businesses will drive long-term growth. The company is expected to achieve revenue of 75.45/96.16/11.428 billion yuan in 24-26, and net profit to mother of 3.72/48/559 million yuan, corresponding to 20/16/13 times PE, maintaining the “recommended” rating.
Risk warning: Consumer electronics demand is weak; industry competition is intensifying; new business development falls short of expectations.