Incident: The company released its 2024 quarterly report. In 24Q1, the company achieved operating income of 2.123 billion yuan, an increase of 17.11% over the previous year, and realized net profit of 188 million yuan, an increase of 33.78% over the previous year.

Comment:

The number of global IoT connections continues to grow. Benefiting from the rapid development of communication technology, the Internet of Things is showing a rapid development trend around the world. According to the “Annual Mobile Economy Report” released on February 28, GSMA2024, the number of global mobile network terminal connections reached 12.1 billion in 2023, of which 3.5 billion were cellular IoT connections, which is expected to reach 5.8 billion by 2030, and global demand for IoT connectivity will continue to grow. According to the “2023 Communications Industry Statistical Bulletin” issued by the Ministry of Industry and Information Technology, by the end of 2023, the total number of mobile network terminal connections in China reached 4,059 billion, of which the number of cellular IoT terminal users reached 2,332 billion, accounting for 57.5% of the number of mobile terminal connections, an increase of 26.4% over the previous year, a net increase of 488 million in 2023, achieving rapid growth; the scale of cellular IoT terminals used in public services, vehicle networking, smart retail, smart homes and other fields reached 799 million, 454 million, 335 million and 2.65 million respectively 100 million.

Continue to increase R&D investment and product layout. The company continues to focus on the IoT vertical industry. In 2023, it will release a variety of new products, enrich the product matrix, launch the 5G RedCap module FG131/FG132 series, launch the 5G module Fx190/Fx180 series, launch the smart modules SC151-GL and SC228, launch the LTecat1 module LE270-CN, launch the Wi-Fi module WN170-GL and other products, and launch the RN93xx and RN94xx series 5G R16 modules to launch a new generation The V2X module RX135 and the vehicle-standard WiFi Bluetooth communication modules RW962B and RW964B continue to deploy two types of products: 5G vehicle networking modules and smart cockpit SOC to meet the IoT needs of different customers and market regions around the world.

Strengthen close cooperation with industry ecosystem partners. The company focused on the commercial use of REDCap technology, pioneered the launch of Redcap modules, and industry partners with operators, chip vendors, industry customers, etc. In 2023, the company's 5G module FM650 helped Alibaba Cloud build Shadowless Rubik's Cube Pro. The FG190W module helped customers take the lead in delivering samples, complete 5G SUL assisted uplink function verification with the Internet of Things, and launched a variety of 5G smart mining vehicle terminals, etc. in close cooperation with industry ecosystem partners The high-computing smart cockpit platform also cooperates closely with chip vendors in exploring platform cost performance and innovating software functions to accelerate large-scale commercial use of IoT terminals.

Profit forecasting, valuation and rating: The Internet of Things has driven the company's rapid growth, and the company's net profit level achieved high growth in 24Q1. We maintained the company's net profit forecast for 2024-2025 at RMB 731/886 million, and added the company's net profit forecast for 2026 to RMB 1,045 million, corresponding to PE18/15/13X. Maintain a “buy” rating.

Risk warning: The gross margin of modular products is declining; the risk of increased market competition.