First Shanghai: Maintaining Ruisheng Technology's (02018) “Buy” rating target price of HK$39.09

The Zhitong Finance App learned that First Shanghai released a research report stating that it maintains Ruisheng Technology's (02018) “buy” rating and predicts that the company's revenue for 2024-2026 will be 26.03 billion yuan/29.24 billion yuan/32.99 billion yuan respectively; net profit will be 1.68 billion yuan/2.13 billion yuan/2.66 billion yuan, respectively, with a target price of HK$39.09 billion.

First, the main views of Shanghai are as follows:

Performance improved in the first half of '24:

In the first half of 2024, the company achieved revenue of 11.25 billion yuan (RMB, same below), up 22.0% year on year; gross margin of 21.5%, up 7.4 percentage points year on year; net profit of 540 million yuan, up 257.3% year on year, exceeding market expectations, mainly benefiting from the recovery trend of the global smartphone market and the increase brought about by the optimization of the acoustic, optical and precision structural components product portfolio, combined with PSS. Looking ahead to the second half of '24, the smartphone market will enter the peak season for new models. The company will continue to invest in the IoT, AR/VR, and in-vehicle fields and obtain relevant patents, etc. At the same time, PSS will help the company penetrate the global automotive industry. The bank is optimistic about the company's future development.

Mobile phone acoustics continues to upgrade standards, and in-vehicle acoustics advance in parallel at home and abroad:

The company's acoustics business achieved revenue of 3.46 billion yuan, a year-on-year increase of 4.1%, gross margin of 29.9%, and a year-on-year increase of 4.4 percentage points, benefiting from high-end products; vehicle acoustics businesses such as PSS had revenue of 1.52 billion yuan and a gross profit margin of 25.0%, and the synergy between PSS and the company gradually became apparent. The bank expects that the company's high-end acoustic products will continue to introduce major models and domestic and foreign business revenue and profit contributions brought by PSS, and that acoustics revenue and profit will increase by a certain margin throughout '24.

The optical business is expected to reverse by the end of the year, and the gross profit of precision structural parts and other businesses will increase:

The optical business achieved revenue of 2.21 billion yuan, an increase of 24.9% over the previous year, thanks to the increase in the company's share of mid-range and high-end models, which brought about higher shipments and unit price improvements. The gross margin changed from negative to positive to 4.7%, an increase of 21.7 percentage points over the previous year. Among them, the gross margin of plastic lenses and optical modules both increased year over year. The company's share of 6P and above plastic lens shipments continued to increase, and new 7P targeted projects were obtained. WLG's process yield was continuously optimized, and shipments increased 40% year-on-year to 1.4 million units. The company expects to reverse losses at the net profit level in Q4.

The electromagnetic transmission and precision structural parts business achieved revenue of 3.66 billion yuan, an increase of 1.1% year on year, and gross margin of 22.9%, up 3.6 percentage points year on year. The increase in revenue was mainly due to the continuous release of products such as high-end motors, heat dissipation, metal middle frames, and notebook motor cases. The sensor and semiconductor business revenue was 390 million yuan, with a gross profit margin of 16.4%, up 5.1 percentage points from the previous year, benefiting from the increase in the share of high gross profit revenue. The bank anticipates that AI phones will drive the iteration of intelligent voice interaction technology and promote the upgrading of MEMS microphones.