investment points:

cellular baseband technology as the core, actively expand business incremental space

Aojie technology was established in 2015, for wireless communication technology has carried out a wide and comprehensive technical layout. The company's cellular baseband chip is the basic disk, with revenue of $2.079 billion billion in 2023, accounting for 79.97 percent of total revenue, and is expected to continue to benefit from growing demand for the Internet of Everything in the future. We are optimistic about the company's future multi-point layout and actively expand the incremental space logic as follows:

core point #1: internet of things products have obvious advantages, wearable market products are widely recognized, and the company is deeply engaged in the cellular internet of things market. in 2023, the company's Cat.1bis segment market share ranked first; Cat. 4 is accelerating the process of domestic substitution, ASR1806 through ACE-Q100 certification, the development of the car networking market or for the company to empower. At the same time, the company's first 5G RedCap chip ASR1903 came out ahead of schedule in February 2024, leading into the 5G commercial year.

the company by virtue of product advantages, in the traditional networking basic disk on the basis of sustainable development, and actively expand the wearable market. Canalys predicts that the overall shipment of wearable wristband devices is expected to reach 0.217 billion units by 2025, of which the growth rate of smart watches will exceed that of other wearable wristband categories. As an important player in this field, the company has further set up special projects, with smart watches as the core, on the basis of enriching the original product line of children's watches, and aiming at the needs of adult watch users, the company has continuously improved its three core capabilities of "communication", "endurance" and "high integration" to create a set of wearable device solutions from chip to complete software SDK. At present, the company's wearable chip has been widely used in many well-known brands of smart watches in the world.

core point #2: the company's smartphone SoC was born in 2024, with global smartphone shipments of 1.17 billion units moving from 4G to 5G in 2023. although it has declined year on year, it is still an incremental market with vast space. The company has steadily advanced the development and commercialization of the first 4G SoC chip, 23Q1 company 4G SoC chip has been successfully streamed, Q3 began customer import. According to the company's micro-tweet in June 24, the company's 4G SoC smartphone chip ASR8601 joined hands to logicmobility the L65A mobile phone, making its debut in the Latin American market. ARM Cortex-A series processor architecture upgrades and technology iterations are also expected to empower the company's products. Subsequently, the company will continue to iterate on 4G smartphone chips and will launch 5G smartphone chips in due course. We are optimistic about the company's steady play, gradually open the smartphone market broad space.

profit forecast and investment proposal

we expect the company's operating income in 2024-2026 to be 32.42/42.77/6.037 billion yuan, corresponding to PS multiples in 2024-2026 of 5.3/4.0/2.8x respectively. Considering that the company's cellular baseband chip business still has growth potential in the future, and is expected to open up the second growth space of smartphone chips, the first coverage gives a "buy" rating.

risk tips

the risk of market competition, the risk of product development is less than expected, the risk of new product shipments less than expected.