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Author: Wen Yu, Editor: Xiao Shi Mei

Goertek, which was stabbed by Apple, has quietly made a comeback!

According to the latest performance forecast, the company achieved a net profit attributable to shareholders of RMB 1.181 billion to RMB 1.265 billion in the first half of the year, a year-on-year increase of 180% to 200%.

【Squat jump】

On November 8, 2022, Goertek Co., Ltd. suddenly announced that the company had received a notice from a major overseas customer to suspend the production of a smart acoustic complete product. Tianfeng International Securities analyst Ming-Chi Kuo later confirmed that the product that was canceled was Apple's popular product AirPods Pro 2.

According to Everbright Securities' estimates, AirPods generated approximately 20.6 billion and 24.4 billion in revenue for Goertek in 2020 and 2021, accounting for 35.7% and 31% of Goertek's total revenue, respectively. The loss of core business orders will undoubtedly have a fatal impact on the company.

In 2022, Goertek was forced to make an asset impairment provision of 1.797 billion yuan, which directly led to a nearly 60% year-on-year decline in the company's net profit attributable to the parent company. In 2023, Goertek entered a full recession, with its net profit attributable to the parent company continuing to decline sharply by 43% to 1.019 billion yuan, only a quarter of that in 2021, and its full-year net profit margin of 1.03%, less than one-fifth of that in 2021. The stock price plummeted even more.At its peak, Goertek’s market value was close to 200 billion yuan, but now it is only about 80 billion yuan.

Historically, it is basically impossible for Apple's "abandoned children" to make a comeback in a short period of time, so almost no one thought that Goertek could come back against the trend.

In the first half of this year, Goertek expects its net profit attributable to its parent company to be between 1.181 billion and 1.265 billion yuan, minus 380 million yuan in the first quarter.The net profit attributable to shareholders of the parent company for the entire second quarter recovered to more than 800 million, which is the second highest value for the second quarter in the company's history, second only to the second quarter of 2022.

In terms of profit margin, the company's net profit margin has increased to 1.89% in the first quarter. Although the second quarter data has not yet been released, it is likely to continue to grow. It is entirely expected that the overall growth rate will reach 2%-3% in the first half of the year.

Another point worth noting is that there was news that Goertek's factory had resumed recruiting with a raise in June this year. The highest hourly wage for hourly workers can reach 26 yuan. The company provides accommodation and has buses specifically for picking up people.

Taking all of this into consideration, Goertek is emerging from the shadow of Apple's order cuts and is recovering rapidly, but this is not the company's biggest highlight right now.

【Reborn】

Goertek is not only recovering in total volume, but also adjusting its structure.

Dissecting the company's business structure, there are currently three major businesses: precision components, smart acoustic machines, and smart hardware. Among them, Apple TWS headset OEM is affiliated with smart acoustic machines, and VR/AR OEM is placed under smart hardware. For a long time, smart acoustic machines have always been the basic plate of Goertek. Taking 2020 as an example, the revenue of this business was 26.67 billion, accounting for 46% of the total revenue. Therefore, the label given to this company by the capital market at that time was Apple's OEM factory.

In 2020, Goertek signed an exclusive OEM agreement with Meta's hardware brand Oculus, and successfully won the exclusive supply order for the latter's new generation product Quest 2 device. Since then, the smart hardware business has started to run wild, with revenue soaring from 17.6 billion in 2020 to 63 billion in 2022, accounting for 60% of the company's total revenue, while the proportion of smart acoustic whole machine business has dropped below 25%.

Therefore, although Apple is still a major customer of Goertek, Goertek can no longer be simply regarded as an Apple OEM. Compared with smartphones, VR/AR better represents Goertek's future.

First of all, the market is big enough. According to the latest data from IDC, a total of about 6.75 million VR/AR devices were sold worldwide last year. Under the influence of new product releases and rising consumer demand, global VR/AR device shipments are expected to grow by 46.4% in 2024, and by 2028, global shipments will reach more than 35 million units.

6.75 million units correspond to Goertek's smart hardware revenue of 58.7 billion. If the market structure remains unchanged, then 35 million units will theoretically correspond to Goertek's revenue of about 300 billion. Based on realistic considerations, even if a 30% discount is given,A revenue of 200 billion is equivalent to twice Goertek’s current total revenue.

Secondly, the competition landscape in this industry is relatively good. In the mid-to-high-end VR/AR market, Goertek has already taken 80% of the market share. It is not ruled out that more players will join in as the industry expands, but Goertek's leading advantage is certain.

As the scale continues to increase, there is still a lot of room for cost reduction and efficiency improvement, which will also effectively hedge the profit loss caused by intensified competition. Before 2023, the gross profit margin of Goertek's smart hardware business was basically above double digits, and this profit margin level was even not inferior to that of smart acoustic machines.

Finally, as VR/AR becomes a new business carrier, Goertek's long-standing problem of over-reliance on a single large customer will be effectively alleviated.

In the era of smart phones, Apple is the only dominant player, while the VR/AR field is still uncertain. Meta, Google, Microsoft, Sony, Apple and some domestic manufacturers are all eager to try. These are all Goertek's potential customers. No matter who succeeds in the end, Goertek will be the winner.

In 2022, when Goertek was at its lowest point, "Market Value Observer" published an article expressing optimism about the company's long-term development in the future. On the one hand, this confidence was based on the judgment of the prospects of the VR/AR business, but more importantly, it was full of expectations for the founder Jiang Bin.

Jiang Bin is a typical Shandong native. He likes to work with his head down and does not like to show off. He has repeatedly warned his subordinates that the most important thing for a manufacturing company is to work hard. However, the other side of being low-key and humble is extreme paranoia. Jiang Bin is a 100% person. If he does something, he will do it to the extreme. In his own words:"From the day I started this business, I had the courage to work hard to the death. There is no second in this industry. You have to work to the extreme."

After making the first pot of gold in the early days of his business, all executives thought that he should buy a decent new car to improve the company's appearance. However, Jiang Bin insisted on spending hundreds of thousands of dollars to build a world-class soundproofing room at the time. In pursuit of technological upgrades, Jiang Bin personally cut off 80% of his low-end manufacturing customers and refused to make any money.

Only those who are not short-sighted, not satisfied, and not impetuous can cross the cycle and move to a higher level. From 2010 to 2021, Goertek, which joined Apple's supply chain, ushered in a golden decade. During this period, its revenue increased by 29 times, its net profit increased by 14 times, and its stock price increased by more than 20 times (after adjustment). As the actual controller, Jiang Bin naturally became the biggest beneficiary of this overwhelming wealth. In the "2020 Global Billionaires List" released by Forbes, he once won the title of Shandong's richest man with a net worth of US$3.2 billion (approximately RMB 22.6 billion).

This is obviously not Jiang Bin’s limit. If Apple brought him the first glory in his life, then VR/AR will soon bring him a second, greater glory.

Disclaimer

The content of this article related to listed companies is the author’s personal analysis and judgment based on the information disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, regular reports and official interactive platforms, etc.); the information or opinions in the article do not constitute any investment or other business advice, and Market Value Observation shall not bear any responsibility for any actions arising from the adoption of this article.