Goertek released its third-quarter financial report for 2024 after the A-share market closed on the evening of October 23, 2024 (as of September 2024), with the following key points:
1. Overall Performance: Revenue Exceeded Expectations Due to New Product Stocking. ① Goertek's total revenue in the third quarter of 2024 reached 29.3 billion RMB, a year-on-year increase of 1.7%, outperforming market expectations (27.4 billion RMB). The growth in revenue this quarter mainly came from customers stocking up on new products. ② The company's gross profit margin in this quarter was 11.4%, a year-on-year increase of 1.3 percentage points, basically in line with market expectations (11.1%). With the recovery of downstream customer orders, the company's overall gross profit margin returned to above 10%;
2. Expenses and Operating Conditions: Reasonable Inventory Levels, Profits Significantly Exceeded Expectations. Goertek's inventory in the third quarter of 2024 was 14.289 billion RMB, a year-on-year increase of 0.3%. After the previous inventory digestion, the company entered a new product stocking phase this quarter, with the absolute value of inventory rising, but the inventory-to-sales ratio relatively low. The company's core four expense ratio this quarter was 7.2%, mainly influenced by the increase in interest income, leading to a significant decrease in financial expenses this quarter.
Overall, Goertek's financial report this quarter is overall positive.
Both the revenue and profit sides of the company this quarter outperformed market expectations. In terms of market expectations, the market previously expected Goertek.CN to slowly recover along with the industry. However, with the successive release of new products such as Quest 3S and Airpods 4 in the third quarter, the company's early stocking brought incremental performance.
Goertek mainly provides finished product assembly services for Quest and Airpods products, as well as microphone and other related components for iPhone products.
From the industry and financial report, important information can be observed:
1) Industry Outlook: Although downstream demand has not been fully stimulated, it continues to show signs of recovery. The mobile phone, PC, and other industries maintained single-digit growth in this quarter;
2) Airpods: Despite losing some Airpods orders previously, the company gradually regained market share in 2024 and regained the trust of Apple Inc.;
3) New Product Stocking: Although Quest 3S, Airpods 4, and the iPhone 16 series were all released in September, the company, as a manufacturing end, started stocking up for customers in the third quarter in advance, which has already brought in some revenue;
4) Shareholder Returns: In the past decade, the company has only distributed dividends at the end of the year. Now, after distributing mid-year dividends, the company plans to distribute dividends again. Taking into account the mid-year dividend distribution, the total dividend distribution ratio for these two times has reached 21.67%.
Overall, the company has passed the low point in its operations. With the industry picking up and the impact of new product shipments to customers, the company's performance is expected to continue to improve. The previous decline in the company's stock price was mainly due to industry weakness and operational issues. With these two factors fading away, the company's stock price has also seen a recovery. This good financial report is expected to bring confidence to the market in the short term. In the medium to long term, attention still needs to be paid to the performance of core customer products in the market and the company's own market share improvement.
Below is Dolphin's specific analysis of Goer's financial report:
I. Overall Performance: New Product Inventory, Revenue Exceeds Expectations
1.1 Revenue End
In the third quarter of 2024, Goer's total revenue was 29.3 billion yuan, a year-on-year increase of 1.7%, exceeding market expectations (27.4 billion yuan).
Dolphin believes that the growth in revenue this quarter is mainly driven by customer inventory of new products.
1) Smart Hardware: Meta launched the Quest 3S product in this quarter, expected to go on sale on October 15th;
2) Smart Acoustic Assemblies: In this quarter, Apple also released a series of new products such as Airpods 4 and iPhone 16.
For these new products, Goer mainly provides finished assembly services for Quest products and Airpods products, while also supplying microphone and other related components for iPhone products. As an electronic product manufacturer, the company is at the forefront of the industry chain. In the third quarter, the company has started inventory preparation for customer new products, thereby driving the revenue increase for this quarter.
1.2 Gross Profit End
In the third quarter of 2024, Goer achieved a gross profit of 3.324 billion yuan, a year-on-year increase of 13.9%, driven by an increase in gross profit margin.
The company's gross profit margin this quarter was 11.4%, a year-on-year increase of 1.3%, basically meeting market expectations (11.1%). The significant drop in gross profit margin last year was mainly due to Apple's order cuts. With the recovery of related orders and the industry picking up, the company's gross profit margin has risen back above 10%.
Dolphin believes that although the new products in smart acoustic assemblies and smart hardware are expected to bring incremental demand, the relatively low gross profit margin of the assembly business will keep the overall gross profit margin relatively stable in the next quarter.
II. Expenses and Operating Conditions: Reasonable Inventory, Profits Significantly Exceed Expectations
2.1 Operating Indicators
① Accounts Receivable: In the third quarter of 2024, GoerTek's accounts receivable amounted to 14.63 billion yuan, a year-on-year decrease of 14.9%. Looking at the accounts receivable/revenue ratio, GoerTek's ratio for this quarter is 0.5, which is at a relatively reasonable level.
② Inventory: In the third quarter of 2024, GoerTek's inventory amounted to 14.289 billion yuan, a year-on-year increase of 0.3%. Looking at the inventory/revenue ratio, GoerTek's ratio for this quarter further declined to 0.49. After the inventory turnover in the previous period, the company entered a new product stocking phase this quarter, resulting in a slight increase in the absolute value of inventory, but the inventory ratio is relatively low.
As the third quarter is the period when downstream customers release new products, the company is on the production side, and advance stocking often increases the inventory amount. The overall inventory situation of the company is relatively reasonable at present.
2.2 Expense Ratio
In the third quarter of 2024, GoerTek's total expenses amounted to 2.114 billion yuan, a year-on-year decrease of 10.4%. The expense ratio is 7.2%, with a slight decrease in the expense ratio, mainly due to the growth in interest income, thereby reducing the company's financial expenses.
1) Sales Expenses: This quarter amounted to 0.158 billion yuan, a year-on-year increase of 1.9%, with a sales expense ratio of 0.5%. The company's sales expense ratio is relatively stable overall;
2) Administrative Expenses: This quarter amounted to 0.545 billion yuan, a year-on-year decrease of 9.9%, with an administrative expense ratio of 1.9%. With the growth in company revenue, the administrative expense ratio is maintained at around 2% due to economies of scale;
3) Research and Development Expenses: This quarter amounted to 1.306 billion yuan, a year-on-year increase of 0.5%, with a research and development expense ratio of 4.5%. Research and development expenses account for the largest proportion among the four expenses, mainly invested in the company's research and development in the field of smart hardware and other precision components. The number of research and development personnel and expenses remained stable this quarter;
4) Financial Expenses: This quarter amounted to 0.105 billion yuan, a year-on-year decrease of 65%, with a financial expense ratio of 0.4%. The financial expenses of the company this quarter underwent the most significant change among operating expenses. The decrease in financial expenses this quarter is mainly due to the increase in the company's interest income.
2.3 Net Profit
In the third quarter of 2024, GoerTek's net profit attributable to shareholders was 1.12 billion yuan, a year-on-year increase of 138%, exceeding market expectations (0.93 billion yuan). The better-than-expected profit performance of GoerTek this quarter is mainly due to the new product stocking that began in the third quarter The company's net profit margin for this quarter is 3.8%, a year-on-year increase of 2.2 percentage points, driven by orders and operational efficiency improvement.
Dolphin Research on GoerTek's historical articles:
Financial Reports
August 14, 2024 Financial Report Review "GoerTek: Traditional Business Recovery, VR Still Struggling"
April 24, 2024 Financial Report Review "GoerTek: Apple's Entry, Can VR/AR Turn the Tide?"
October 27, 2023 Financial Report Review "GoerTek: Profit Decline, When Will It Recover?"
April 18, 2023 Financial Report Review "GoerTek: Order Cuts Impact Performance, Can Apple's Little Brother Survive?"
August 30, 2022 Financial Report Review "GoerTek: Why Did VR Growth Pause?"
April 27, 2022 Financial Report Review "VR Growth, GoerTek Guides Against the Market Again"
March 30, 2022 Financial Report Review "GoerTek: 'Downfall' is Temporary, Future is Still VR"
August 27, 2021 Financial Report Review "GoerTek: 'VR Spotlight' Overshadows 'Loneliness' of TWS Earphones"
In-depth Analysis
October 11, 2022 Company In-depth Analysis "Goer's Redemption: Pico Supported by ByteDance"
June 17, 2022 Industry In-depth Analysis "Consumer Electronics Market Maturity, Apple Holding Strong, Xiaomi Struggling"
August 20, 2021 Company In-depth Analysis " Goer Shares (Part 2): The Metaverse is Too Far Away, VR Game Consoles Are Already "Hot" "
July 23, 2021 Company In-depth Analysis " Goer Shares (Part 1): What Did the Leading Company in the Fruit Chain Experience in Another Sharp Decline? "
Risk disclosure and statement of this article: Dolphin Investment Research Disclaimer and General Disclosure
