Goertek released its second-quarter financial report for 2024 on the evening of August 14, 2024, Beijing time, with the following key points:
1. Overall Performance: Revenue & Gross Margin Improving. ① This quarter, Goertek's total revenue reached 21.1 billion RMB, a year-on-year increase of 0.1%. The revenue growth was driven by the smart acoustic integrated machine and precision zero-component businesses. ② The gross margin for this quarter was 13.6%, a year-on-year increase of 5.9 percentage points. The increase in gross margin was mainly due to improved order conditions from some downstream customers. ③ The net profit attributable to the parent company in this quarter was 850 million RMB, showing continued improvement in profitability.
2. Progress in Various Businesses: Acoustics and Components Showing Significant Recovery. While smart hardware revenue remains the company's largest source of performance, the smart hardware business was still declining in the first half of the year. The growth achieved this quarter was mainly driven by the smart acoustic integrated machine business and precision zero-component business. The impact of previous adjustments to smart acoustic integrated machine orders has been significantly rectified.
3. Expenses and Operating Conditions: Reasonable Inventory, Significant Profit Increase. The company's current inventory situation is relatively reasonable, with some customer demand for stocking up. While expenses have increased, the overall proportion remains stable.
Dolphin's Overall View:
Goertek's financial report this time is still good. Revenue has stopped declining, and the gross margin has significantly improved, mainly driven by the recovery of the smart acoustic integrated machine and precision zero-component businesses. Although the company's performance exceeded market expectations, the final profit in this financial report falls within the range of the performance forecast the company previously issued.
With the impact of some downstream recovery and regaining customer orders, the revenue side of the company has stopped declining, and the gross margin has returned to double digits. From this perspective, it is difficult for the company's profitability to return to the breakeven point of the past.
However, it is worth noting that smart hardware remains the company's largest source of revenue. With the introduction of VR, MR, and other products by meta and Apple, the market demand side has not shown significant improvement. What was originally a highlight of the company's growth has now become a drag.
Dolphin believes that with the arrival of the peak season for electronic products in the second half of the year, the company's performance is expected to continue to improve along with the industry. However, the demand for smart hardware remains insufficient, which will not only affect the company's performance but also impact market confidence in the company's growth . Driven by the improvement in performance, the company is expected to achieve some recovery, but the specific extent will be directly influenced by the growth prospects.
Below is Dolphin's specific analysis of $Goertek(002241.SZ):
I. Overall Performance: Revenue & Gross Margin Improving
1.1 Revenue
In the second quarter of 2024, GoerTek's total revenue reached 21.1 billion yuan, a year-on-year increase of 0.1%, slightly lower than the market expectation of 21.4 billion yuan. The revenue side is stabilizing, mainly driven by the recovery of the smart acoustic integrated machine and precision zero component business.
1.2 Gross Margin
In the second quarter of 2024, GoerTek achieved a gross profit of 2.87 billion yuan, a year-on-year increase of 78.2%. The growth in gross profit is mainly due to the improvement in gross margin.
The company's gross margin for this quarter is 13.6%, a year-on-year increase of 5.9 percentage points, better than the previous market expectation. The rise in gross margin is mainly due to the improved profitability of the smart acoustic integrated machine business. The current business gross margin has basically returned to around 10%.
II. Progress of Various Businesses: Acoustics and Components Showing Significant Recovery
In the smart hardware business, it is mainly composed of AR/VR devices (Meta's Oculus, Pico, etc.), and PS game consoles. With the growth of the business, the smart hardware business has consistently ranked first in the company (in terms of revenue and gross profit).
2.1 Smart Hardware Business
In the first half of 2024, GoerTek's smart hardware business achieved revenue of 19.9 billion yuan, a year-on-year decrease of 32.3%. The decrease in the company's hardware business is mainly due to the decline in products such as VR and other virtual reality products.
Although Meta and Apple have successively launched related products, the current market demand remains weak. The industry situation directly affects the revenue performance of the company's smart hardware.
In the first half of 2024, GoerTek's smart hardware business achieved a gross margin of 9.2%, a year-on-year increase of 3.3 percentage points. Although business revenue is still declining, the gross margin has shown a clear recovery from its low point.
Looking at the gross margin of smart hardware and the overall gross margin, the trends of the two are similar. This is mainly because the smart hardware business accounts for the largest proportion of the company, and therefore has a relatively large impact on the company's overall gross margin.
2.2 Intelligent Acoustic Whole Machine Business
GoerTek's intelligent acoustic whole machine business achieved a revenue of 12.8 billion yuan in the first half of 2024, a year-on-year increase of 38.2%. GoerTek's intelligent acoustic whole machine business mainly focuses on TWS products of Apple and Android manufacturers.
GoerTek's gross profit margin for the intelligent acoustic whole machine business in the first half of 2024 rose to 9.8%, an increase of 5.7 percentage points year-on-year. With the increase in shipments and capacity utilization rate, the gross profit margin of the company's intelligent acoustic whole machine gradually recovered.
The company's recent growth mainly comes from regaining a portion of the market share of major customers, thereby driving both business revenue and gross profit margin to rise.
2.3 Precision Components Business
GoerTek's precision components business achieved a revenue of 6.3 billion yuan in the first half of 2024, a year-on-year increase of 21.2%. GoerTek's precision components business mainly includes MEMS, mic, and other electronic devices. This business was originally mainly used in the mobile phone field, and later began to be gradually introduced into other products by the company.
GoerTek's gross profit margin for the precision components business in the first half of 2024 was 22.5%, an increase of 1.9 percentage points year-on-year. The company's gross profit margin for precision components continues to stabilize above 20%.
The growth of the precision components business is mainly due to the recovery in downstream markets such as mobile phones. In the first half of the year, the global mobile phone shipment volume also saw a year-on-year increase.
III. Expenses and Operating Conditions: Reasonable Inventory, Significant Profit Increase
3.1 Operating Indicators
① Accounts Receivable: GoerTek's accounts receivable in the second quarter of 2024 was 11.18 billion yuan, a year-on-year decrease of 14.5%. Looking at the accounts receivable/revenue ratio, GoerTek's ratio for this quarter is 0.53, maintaining a relatively reasonable level.
② Inventory: GoerTek's inventory in the second quarter of 2024 was 11.89 billion yuan, a year-on-year decrease of 0.1%. Looking at the inventory/revenue ratio, GoerTek's ratio for this quarter is 0.56, remaining relatively stable.
Goer's inventory has seen a significant decline from its peak, but with the arrival of the second half of the year, the peak season for electronic products, the company has made preparations for stocking some products. Overall, the current inventory structure of the company is relatively reasonable.
3.2 Expense Ratio
In the second quarter of 2024, Goer's total expenses amounted to 1.8 billion RMB, a year-on-year increase of 44%. The expense ratio is 8.5%, which is at a relatively reasonable level.
1) Sales Expenses: This quarter amounted to 143 million RMB, a year-on-year increase of 36.2%, with a sales expense ratio of 0.7%, remaining relatively stable;
2) Management Expenses: This quarter amounted to 482 million RMB, a year-on-year increase of 100%, with a management expense ratio of 2.3%, remaining within the range of 2%-2.5%;
3) Research and Development Expenses: This quarter amounted to 1.208 billion RMB, a year-on-year increase of 11.7%, with a research and development expense ratio of 5.7%. The company's research and development expenses account for the largest proportion among the four expenses, mainly invested in the research and development of the company's intelligent hardware and other precision components;
4) Financial Expenses: This quarter amounted to -33 million RMB, with a financial expense ratio of -0.2%, mainly affected by exchange rate fluctuations.
3.3 Net Profit
In the second quarter of 2024, Goer's net profit attributable to shareholders reached 846 million RMB, showing significant growth, outperforming market expectations. The rebound in Goer's net profit this quarter is mainly attributed to the increase in the company's gross profit margin.
In the second quarter of 2024, the company's net profit margin increased to 4%, steadily improving. The improvement in profitability is mainly due to the recovery of the intelligent acoustics and precision components businesses and the increase in gross profit margin. Previously, due to order adjustments, the company regained a portion of the market share of products from major clients.
Dolphin Research on Goer's historical articles:
Financial Reports
April 24, 2024 Financial Report Review "Goer: Apple enters, can VR/AR survive?"
October 27, 2023 Financial Report Review "Goer: Profits declining, when will it stand up?" Financial Report Review on April 18, 2023: "GoerTek: Cutting orders and collapsing performance, can Apple's little brother withstand it?"
Financial Report Review on August 30, 2022: "GoerTek: Why did the VR with doubled growth press the pause button?"
Financial Report Review on April 27, 2022: "VR sees high growth, GoerTek once again sets strong guidance against the market trend | Reading Financial Reports"
Financial Report Review on March 30, 2022: "GoerTek: "Pulling down" is just for now, the future is still VR"
Financial Report Review on August 27, 2021: "GoerTek: "The light of VR" overshadows the "loneliness" of TWS earphones"
In-depth Analysis
Company In-depth Analysis on October 11, 2022: "Goer's Redemption: Pico with the blessing of ByteDance"
Industry In-depth Analysis on June 17, 2022: "Consumer electronics are "ripe", Apple stands firm, Xiaomi struggles"
Company In-depth Analysis on August 20, 2021: "GoerTek (Part 2): The metaverse is too far away, VR game consoles are already very popular"
Company In-depth Analysis on July 23, 2021: "GoerTek (Part 1): What did the leading fruit chain experience after another sharp decline?"
Risk disclosure and statement of this article: Dolphin Investment Research Disclaimer and General Disclosure
