Incident review

On August 28, 2024, the company released its 2024 mid-year report. In 2024, H1 achieved operating income of 4.075 billion yuan, an increase of 5.42% year on year; net profit to mother was 0.333 billion yuan, an increase of 10.17% year on year. Among them, Q2 achieved revenue of 1.952 billion yuan in a single quarter, down 4.91% year on year and 8.06% month on month; realized net profit of 0.146 billion yuan, down 10.27% year on year and 22.50% month on month.

Management analysis

Steady growth in performance: In the first half of 2024, the company continued to increase its independent research and development efforts, continuously optimize and enrich its product line, and continuously improve its deployment in emerging fields such as AI, edge computing power, and intelligent robots, and its performance continued to grow. In the first half of the year, the company achieved a gross profit margin of 21.58%, a slight decrease of 0.56 pct year on year; achieved a net profit margin of 8.18%, an increase of 0.35 pct year on year. The company continued to increase its independent research and development efforts, investing 0.388 billion yuan in R&D in the first half of the year, an increase of 10.78% over the same period last year.

In response to the international market environment, the company sold the automotive front-mounted wireless communication module business: On July 26, 2024, the company issued an announcement to sell the automotive front-mounted wireless communication module business of Shenzhen Ruiling Wireless Technology Co., Ltd. at a price of 0.15 billion US dollars. In August 2023, the chairman of the “Special Committee on China” of the US House of Representatives and others sent a letter to the US Federal Communications Commission to investigate Chinese IoT wireless communication module suppliers, including Yiyuan Communications and Guanghetong. In response to complex changes in the current international market environment, the company chose to divest related businesses. However, the company is still optimistic about communication modules in the European and American markets, and will still invest in the future. In addition, India and other Southeast Asian markets have also performed well this year. The company is vigorously exploring the Indian market this year and is expected to achieve good progress and results.

The future will actively lay out the AI and robotics field: In the future, the company will actively lay out the AI and robotics field: 1) The company established an intelligent module product line in 2019, and will continue to increase investment in related R&D in the future to increase the revenue share of related products. 2) The company established an intelligent computing product line in 2023. Currently, it uses the smart lawnmower segment as a breakthrough point to accumulate and reuse technology to lay the foundation for the robot's mobile technical capabilities. At the same time, the company is actively exploring the field of embodied intelligent robots to lay out the future evolution of robot operation capabilities. The field of AI and robotics is expected to become the company's second growth curve, adding impetus to the company's continued improvement in performance.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2024-2026 to be 8.183/8.923/10.53 billion yuan, respectively; net profit to mother will be 0.71/0.638/0.766 billion yuan respectively, corresponding PE is 12/13/11 times, maintaining a “buy” rating.

Risk warning

The development of the Internet of Things falls short of expectations; new business expansion falls short of expectations; industry competition intensifies; exchange rate fluctuations; international relations are disrupted; and the risk of rising raw material prices.