Torch Core Technology optimizes product structure, gross profit margin of 47.14%, R&D investment in the first three quarters is 160 million, accounting for 34% of revenue

Yangtze River Business Daily News ● Yangtze River Business Daily reporter Xu Jia

The market demand in the consumer electronics industry continues to pick up, and chip design manufacturer Torch Core Technology (688049. SH) optimized its product structure to achieve rapid improvement in operating performance.

A few days ago, Torch Core Technology released a performance forecast. The company expects to achieve operating income of 466 million yuan in the first three quarters of 2024, a year-on-year increase of 23.87%; net profit attributable to owners of the parent company (net profit, the same below) was 70.9 million yuan, a year-on-year increase of 51.09%; The net profit after deducting non-recurring gains and losses (deducting non-net profit, the same below) was 48 million yuan, a year-on-year increase of 31.16%.

The Yangtze River Business Daily reporter noticed that the continuous optimization of product and customer structure according to market demand and technology development trends has become the main reason for the steady improvement of Torch Core Technology's performance during the year. During the reporting period, with the continuous increase in the proportion of sales of high-gross margin products, the company's comprehensive gross profit margin reached about 47.14%, which is expected to increase by 4.10 percentage points year-on-year.

Not only that, Torch Core Technology has further increased R&D investment. In the first three quarters, the company's R&D investment was about 160 million yuan, a year-on-year increase of 34.09%, accounting for 34.33% of operating income.

As of the end of June 2024, the number of R&D personnel of Torch Core Technology is 240, accounting for 70.59% of the total number of employees.

The net profit in the first three quarters was 70.9 million, an increase of 51.09%

As a leading low-power system-on-chip designer in China, Torch Core Technology's main business is the R&D, design and sales of mid-to-high-end intelligent audio SoC chips, and focuses on providing professional integrated chips for artificial intelligence-based Internet of Things (AIoT) fields such as wireless audio, smart wearables and intelligent interaction.

The Yangtze River Business Daily reporter noticed that because the products are mainly used in Bluetooth speakers, wireless home theater audio systems, smart watches, wireless microphones and other fields, the changes in downstream consumer demand have a great impact on the operating performance of Torch Core Technology.

Flush data shows that in November 2021, Torch Core Technology was listed on the Science and Technology Innovation Board. From 2021 to 2023, Torch Core Technology will achieve operating income of 526 million yuan, 415 million yuan, and 520 million yuan respectively, a year-on-year increase of 28.23%, -21.2%, and 25.41%; net profit was 83.9478 million yuan, 53.7518 million yuan and 65.0586 million yuan, a year-on-year increase of 248.5%, -35.97% and 21.04%; The non-net profit was 59.9557 million yuan, 31.145 million yuan and 51.1264 million yuan, a year-on-year increase of 6650.98%, -48.05% and 64.16%.

Among them, in the first year of listing, Torch Core Technology's non-net profit began to make a profit. However, affected by factors such as the macro economy and weak demand for consumer electronics, the performance of Torch Core Technology will decline significantly in 2022. Since 2023, with the recovery of consumer market demand, the performance of Torch Core Technology has stopped falling and rebounded.

A few days ago, the performance forecast released by Torch Core Technology shows that in the first three quarters of 2024, the company is expected to achieve operating income of 466 million yuan, a year-on-year increase of 23.87%; net profit was 70.9 million yuan, a year-on-year increase of 51.09%; The net profit after deduction was 48 million yuan, a year-on-year increase of 31.16%.

In terms of quarters, in the two quarters of 2024, Torch Core Technology will achieve operating income of 118 million yuan and 162 million yuan respectively, a year-on-year increase of 45.48% and 17.52%; net profit was 8.5346 million yuan and 32.4054 million yuan, a year-on-year increase of 6.57% and 94.11%; The non-net profit was 5.4695 million yuan and 17.806 million yuan, a year-on-year increase of 944.2% and 15%.

To sum up, in the third quarter of 2024, Torch Core Technology will achieve operating income of 186 million yuan, net profit and non-net profit of 29.96 million yuan and 24.7245 million yuan respectively, an increase of 18.47%, 34.8% and 20.09% year-on-year respectively.

At the same time, Torch Core Technology said that since the beginning of this year, the company has firmly grasped the market demand and technology development trend, adopted a positive sales strategy, and successfully achieved a substantial increase in the company's operating income.

More than seventy percent of employees are engaged in research and development

Under the diversified market demand, Torch Core Technology continuously optimizes the product structure and expands profit margins through multi-matrix product layout.

Previously, Torch Core Technology has introduced that the company creates high-quality, high-value-added intelligent audio SoC chips, and actively promotes the layout and development of new products, starting from portable products around mobile phones and computers, and deriving from immersive wireless home theater platforms with soundbar around TV as the main body, so as to improve core competitiveness.

According to the announcement, in the first three quarters of 2024, among the main products of Torch Core Technology, the end-side AI processor chip continued to increase in volume, and the sales revenue showed a multiple increase year-on-year; At the same time, the company's low-latency and high-quality wireless audio products performed particularly well, and sales revenue increased significantly. In addition, the Bluetooth speaker SoC chip series has steadily attacked the head audio customers and won the favor of international first-line brand customers.

In the first three quarters of 2024, the comprehensive gross profit margin of Torch Core Technology will reach about 47.14%, which is expected to increase by 4.10 percentage points year-on-year.

The Yangtze River Business Daily reporter also noticed that Torch Core Technology has maintained a high level of R&D investment. In the first three quarters of 2024, the company's R&D investment was about 160 million yuan, a year-on-year increase of 34.09%, accounting for about 34.33% of operating income.

From 2021 to 2023, the R&D investment of Torch Core Technology will be 131 million yuan, 125 million yuan, and 165 million yuan respectively, accounting for 24.95%, 30.07%, and 31.8% of the operating income in each period, respectively.

As of the end of June 2024, the number of R&D personnel of Torch Core Technology is 240, accounting for 70.59% of the total number of employees.

Torch Core Technology also said that the company insists on vigorously investing in R&D in core technology and strategic development direction, focusing on creating high computing power, wireless communication and low-latency and high-quality audio under the premise of low power consumption, and steadily improving the company's core competitiveness through continuous R&D and innovation in these three dimensions.

Previously, the total amount of funds raised by the initial public offering of new shares of Torch Core Technology was 1.311 billion yuan, and the net amount of funds raised after deducting related expenses was about 1.195 billion yuan, of which 722 million yuan was overraised.

As of the end of June 2024, among the IPO fundraising projects of Torch Core Technology, the smart Bluetooth audio chip upgrade and industrialization project, the ultra-low power MCU R&D and industrialization project for the wearable and IoT fields, and the R&D center construction project have invested 143 million yuan, 62.0974 million yuan, and 7.924 million yuan respectively, and the investment progress is 59.97%, 80.25%, and 102.39% respectively.

It is worth mentioning that last month, Torch Core Technology launched a share repurchase plan. The company intends to use the over-raised funds of 22.5 million yuan to 45 million yuan to repurchase shares for employee stock ownership plans or equity incentives, and the proposed repurchase price is not more than 30 yuan per share (inclusive). As of the end of September, the company had not started buybacks.