Goertek’s 3Q24 revenue/ net profit rose +2%/+138% YoY, exceeding previous market expectations. 3Q24 GPM lifted to 11.4% (-2.2 ppts QoQ/+1.2 ppts YoY), mainly due to improving efficiency and better scale effect. Looking into 4Q24/FY25E, we expect Goertek’s earnings will continue to rebound given improving GPM YoY, prudent cost control and better AR/VR/gaming demand with multiple product launches from major VR/AR players. We raised FY24-26E EPS estimates by 0-6% to reflect 3Q24 results, better operating leverage and expense control. In the longer term, we believe Goertek is well-positioned to capture opportunities in AR/VR product cycle from players such as Meta, Sony, Google, Samsung and Huawei. Maintain BUY with new TP of RMB27.39, based on same 25x FY25E P/E.

3Q24 above expectations on better efficiency and cost controls. 3Q24 revenue/ net profit rose +2%/+138% YoY, beating market expectations, mainly driven by higher utilization, efficiency improvement and prudent cost controls. We believe Goertek’s profitability recovery will continue into 4Q24E and we estimate 4Q revenue/net profit will grow 36.3%/166.7% YoY, benefiting from the launch of Meta Quest 3S, AirPods 4 Series and other ARVR products.

4Q24/2025 Outlook: Continued profitability recovery and sales growth from edge AI and wearable product launches. In addition to order recovery of AirPods (after share loss in last two years) and product cycle of AirPods 4, we think Meta’s Quest 3S and upcoming Sony PS5 Pro will boost revenue growth in 4Q24/1H25E. Overall, we expect Goertek’s net profit to grow 164%/30% YoY in FY24/25E.

Maintain BUY. We think Goertek’s industry leadership and product roadmap in XR/acoustics/gaming segments will allow it to benefit from industry recovery and upcoming new XR/gaming console product cycle in FY24/25E. We lifted our FY25/26E EPS estimates by 6%/6% mainly for better wearable product revenue and operating efficiency. Our new TP of RMB27.39 is based on same 25x FY25E P/E. Maintain BUY. Upcoming catalysts include new XR/gaming product launches and continued margin recovery.