In 3Q24, the company achieved revenue of 884 million yuan (yoy: +12.34%, qoq: +7.20%), net profit attributable to the parent company of -148 million yuan (loss increased by 57 million yuan year-on-year and 08 million yuan month-on-month), and net profit not attributable to the parent company was -175 million yuan (loss increased by 62 million yuan year-on-year and 32 million yuan month-on-month). The company's single-quarter revenue hit a record high, and the year-on-year increase was mainly due to a significant increase in the sales volume of chip products. However, due to the low revenue recognition of chip customization services and IP licensing business with higher gross profit margins, the consolidated gross profit margin in 3Q24 decreased by 2.81pct quarter-on-quarter to 21.94%, and we expect the gross profit margin of chip products to remain basically stable. In addition, the company's 3Q24 loss increased due to the increase in R&D expenses in the third quarter. We expect that the demand for pan-AIOT industry in the fourth quarter is expected to continue the current boom, and the iteration of smartphone SoCs is progressing smoothly, and the company may usher in a non-linear growth inflection point. The target price is 65 yuan, and the "buy" rating is maintained.

3Q24 Review: AIOT demand picks up, and sales of the first 4G smartphone SoC climbs, and in terms of business, the company will continue to expand its sales scale and market share in the cellular IoT market in the second half of the year, and the number of cellular baseband/non-cellular baseband chip sales is expected to continue to maintain month-on-month growth. In the field of smart phones, the first 4G mobile phone chip has been successfully shipped in the Latin American market, according to the company's announcement, at least 5 smart phones have adopted this chip, smart watches, smart tablets, children's learning machines and other smart terminal markets to promote the equipping, the company expects the total shipment of the chip to reach one million by the end of the year. The company's sales and administrative expenses remained basically stable, and the R&D expenses in 3Q24 increased by 19.86%/11.16% year-on-year due to the increase in share-based payment expenses and tape-out expenses, and the impact of fresh graduates in the second half of the year, and the R&D expense ratio increased by 1.25pct to 35% month-on-month. In terms of inventory, as of the end of 3Q24, the company's inventory was 1.291 billion yuan, an increase of 0.02 billion yuan from the end of the previous quarter, and the inventory turnover days were 192 days.

2025 Outlook: 8-core 4G smartphone platform is about to be launched, the second growth curve is gradually clearThe company focuses on the pan-AIOT and smartphone market layout, and the product matrix is gradually improved, and we expect that the revenue is expected to maintain rapid growth in 25/26: 1) The 8-core 4G smartphone SoC project is progressing in an orderly manner, and it is expected to complete the customer introduction by the end of the year, laying the foundation for mass production and marketing next year. The company's 5G smartphone SoC products are under research and development, and are expected to relay 4G products in the future. 2) In the first half of the year, the company launched its first 5G RedCap chip, successfully passed the certification test of China Mobile's 5G RedCap chip and put it into storage.

3) The company's Cat.1 and Cat.4 products maintain a competitive advantage in the market, and accelerate the expansion to the industrial Internet of Things and automotive fields in addition to traditional broadband MBB, smart payment, sharing economy and other scenarios.

Investment Advice: Target Price of 65 Yuan, Maintain "Buy" Rating

We maintain the company's 24/25/26 revenue and profit forecast of 35.04/45.30/6.512 billion yuan, and slightly reduce the future gross profit margin considering the competitive pressure of Internet of Things products and changes in product structure. Considering the company's scarcity as a domestic baseband chip manufacturer, and the smartphone SoC has been mass-produced and shipped, it gives 6x 25PS (the median consensus expectation of comparable companies is 6x 25PS), the target price is 65 yuan, and the "buy" rating.

Risk warning: product research and development is less than expected, market competition is intensifying, and customer introduction is less than expected.