Espressif Systems(SH:688018) Southwest Securities·2024-08-06 06:03Investment Rating - The report maintains a "Buy" rating for the company with a target price of 134.05 CNY over the next six months [1][2]. Core Insights - The company reported a record high in single-quarter performance, with revenue of 9.2 billion CNY in the first half of 2024, representing a year-on-year growth of 38%, and a net profit of 1.5 billion CNY, up 134.9% year-on-year [1]. - In Q2 alone, the company achieved revenue of 5.3 billion CNY, a quarter-on-quarter increase of 37.7%, and a net profit of 0.98 billion CNY, up 81.3% quarter-on-quarter [1]. - The significant improvement in profitability is attributed to increased penetration in the digital intelligence sector and an improving competitive landscape [1]. - The company’s gross margin improved by 2.2 percentage points to 44.11% in Q2, while the net margin increased by 4.6 percentage points to 18.5% [1]. - New product launches, particularly the ESP32-S3, C2, and C3, have driven revenue growth, with the company’s WiFi chip sales ranking fifth globally [1]. Financial Forecast and Valuation - The company is expected to achieve net profits of 3.5 billion CNY, 4.3 billion CNY, and 5.2 billion CNY for the years 2024, 2025, and 2026, respectively, with corresponding EPS of 3.13 CNY, 3.83 CNY, and 4.59 CNY [2][6]. - The projected dynamic PE ratios for the same years are 33x, 27x, and 22x [2][6]. - The report anticipates a compound annual growth rate (CAGR) of 55.8% for net profit over the next three years, outperforming the industry average [8].