Bestechin Shanghai reported revenue of RMB 2.87 billion in 1Q22, down 1% YoY and 46% QoQ, with net profit attributable to shareholders of RMB 225 million, down 72% YoY and 80% QoQ, lower than our expectations by 74%. The YoY revenue flatness was due to the seasonal nature of the first quarter, which is typically a lull period, and logistics disruptions caused by the pandemic. The loss was mainly due to the rapid increase in R&D expenses. Despite the planned launch of new earphone and watch chips in the next quarter, we maintain our 2022/2023/2024 NP forecasts of RMB 618/872/12.21 billion and view the stock's fair value at 28x 2022 P/E, in line with the Wind consensus average. Given the uncertainty of future demand, we downgrade our target price from RMB 206 to RMB 144 (based on 40x 2022 P/E) and downgrade our rating from Buy to Overweight. The potential upside is -/36% and the market cap ceiling is RMB 12,7246 million. The 6m average daily val is RMB 164.20 and the 52-week price range is RMB 106.03-355.50. The BVPS is RMB 49.42.
