Incident: The company released a performance forecast for the first three quarters of 2024. In the first three quarters of 2024, the company expects to achieve revenue of 2.16 billion yuan, an increase of 48.50% year on year; it is expected to achieve net profit of 0.34-0.36 billion yuan, up 339.75% to 365.62% year on year; it is expected to deduct non-net profit of 0.33-0.35 billion yuan, up 396.86%-426.98% year on year. Among them, Q3 is expected to achieve revenue of 0.911 billion yuan in a single quarter, up 51.42% year on year and 29.18% month on month; net profit due to mother is expected to be 0.157-0.177 billion yuan, up 199.39%-237.47% year on year, up 36.57%-53.95% month on month; it is expected to deduct non-net profit of 0.153 to 0.173 billion yuan, up 197.85%-236.74% year on year, up 38.17%-56.21% month on month.

Demand for AIoT across the board grew in groups, and Q3 revenue hit a record high in a single quarter: In the first three quarters of 2024, demand for the company's AIoT product lines showed mass growth, especially in automotive electronics, industrial, and consumer markets. Combined with the third quarter being the traditional peak season for the industry, the company achieved revenue of about 2.16 billion yuan in the first three quarters, an increase of about 48.50% year-on-year, and is expected to hit a record high in a single quarter. The company leverages the advantages of the AIoT chip “goose-shaped phalanx” layout, using the RK3588 series as the flagship to form multi-level product combinations in each product line that meet different needs, and leverages NPU's advantages in AI algorithm implementation to promote a continuous increase in AIoT's share in multiple AIoT product lines. At the same time, the company's new products, such as RK3576, RK2118, and RV1103B, were quickly introduced to leading customers in target fields, forming new increases and will continue to release incremental value in the future.

Improve the AIoT platform-based layout, and the product line has blossomed more: 24H1. The company continues to focus on key areas, and each product line has blossomed more. 1) Automotive electronics: The company's five major front-end product lines in the field of automotive electronics have gone hand in hand and made many breakthroughs. The number of designated RK3588M customers and projects has increased dramatically, products such as the RK3568M and RK3358M have been launched by more car manufacturers and models, and the RV series chips continue to expand in the fields of driving recorders, MDVR, CMS/DMS, and streaming media rearview mirrors. 2) Machine vision:

The company officially launched the RK3576 and completed the design work for the RV1103B/C, further improving the echelon layout of products with different performance in the field of machine vision. 3) Operators: Expand more product lines in smart office and smart home scenarios, covering various smart terminal applications such as AI IPC, set-top boxes, cloud terminals, NAS, mobile screens, and smart speakers. 4) Audio: Further complement the audio product matrix, release the new AI audio processor RK2118, and continue to promote the development of audio CODEC and audio amplifier chips.

5) Industry and robotics: The company's industrial product solutions have successfully expanded several industry benchmark customers, further increasing its market influence; the company's products are widely used in the field of robotics, and its market share is growing steadily.

6) Education, office and consumer electronics: The company actively strengthens scenario cooperation with customers in various fields, based on the multi-scene computing AIoT platform layout and the layout of AI algorithms for video, vision, audio, etc. with different computing power levels from 0.2 TOPs to 6 TOPs.

A number of new products have been released, and end-side AI implementation has accelerated: In March '24, the company released the RK3576 next-generation mid-range and high-end AIoT processor. Q2 has worked with leading customers in some target scenarios to quickly complete the R&D and mass production of terminal products, which will be mass-produced on a large scale in the second half of 2024. 24H1 also released the latest AI audio processor RK2118 to further improve the company's audio product line. In the field of in-vehicle audio, the company is fully cooperating with leading car companies in vehicle testing; in the field of traditional audio, the company is actively promoting the implementation of cooperative projects with major first-tier audio manufacturers. In addition, the company is developing a number of other chips. The RV1103B/C and RK3506 have all been successfully filmed and will be launched on the market in the second half of 2024. In the field of end-side AI, the company's artificial intelligence application processor chips include RK3588 series, RK3576 series, RK3568 series, RK3562 series, RV1109/RV1126 series, RV1106/RV1103 series, etc., with built-in CPU and GPU cores with different performance levels, and self-developed NPUs with different computing power from 0.2 TOPs to 6 TOPs to fully meet the computing power requirements of different markets and levels. A number of new products are expected to relapse into growth in the second half of 2024, and the company's performance is expected to grow rapidly.

Upgraded to “buy” rating: The company is a leader in domestic artificial intelligence IoT AIoT SoC chips. With the gradual recovery of demand in the downstream market, the company's various product lines showed a trend of mass growth, laying a solid foundation for annual performance growth. Many new products are expected to contribute to the performance in the second half of the year. The company's future growth momentum is sufficient, so we raised it to the “buy” rating. The net profit of the company is expected to be 0.505 billion yuan, 0.75 billion yuan, and 1.072 billion yuan respectively Yuan, EPS is 1.21 yuan, 1.79 yuan, and 2.50 yuan respectively, and the corresponding PE is 63X, 43X, and 30X, respectively.

Risk warning: Downstream demand falls short of expectations, customer imports fall short of expectations, industry competition increases risks, and R&D progress falls short of expectations.