Ping An Securities: Apple FY24Q4 revenue steadily increased, with the 16 series helping iPhone revenue recover growth

According to the Zhitong Finance APP, Ping An Securities released a research report stating that Apple's (AAPL.US) FY24Q4 revenue achieved stable growth; for the single fiscal quarter, it realized a net profit of $14.7 billion, down 36% year-on-year. The decline in net profit was mainly due to the company accounting for a one-time income tax expense of $10.2 billion, which was used to resolve the company's long-term tax-related case in Ireland. In terms of product sales, the iPhone 15 series performed better than last year's 14 series, and the new iPhone 16 series also showed excellent sales, collectively supporting revenue growth in the iPhone business. The iPad business became the fastest-growing hardware category in a single fiscal quarter due to the new iPad Pro and Air models released this year, which filled the demand accumulated from last year's lack of new updates.

Key points from Ping An Securities are as follows:

Event: Recently, Apple released its FY24Q4 financial report for the period ending September 28, 2024. In this quarter, the company achieved operating revenue of $94.9 billion, up 6.1% year-on-year, and realized a net profit of $14.7 billion, down 36% year-on-year.

Revenue achieved stable growth, while tax payments led to profit decline.

In fiscal year 2024, the company achieved revenue of $391 billion, up 2.02% year-on-year, and realized a net profit of $93.736 billion, down 3.36% year-on-year, with a gross margin of 46.21%, an increase of 2.08 percentage points compared to fiscal year 2023, and a net profit margin of 23.97%, a decrease of 1.34 percentage points compared to fiscal year 2023. For the single fiscal quarter, FY24Q4, the company achieved operating revenue of $94.9 billion, up 6.1% year-on-year, and realized a net profit of $14.7 billion, down 36% year-on-year. The decline in net profit was mainly due to the company accounting for a one-time income tax expense of $10.2 billion, which was used to resolve the company's long-term tax-related case in Ireland. In terms of profit margins, the gross margin for FY24Q4 reached 46.22%, up 1.05 percentage points year-on-year, down 0.04 percentage points quarter-on-quarter, and the net profit margin reached 15.52%, down 10.13 percentage points year-on-year, down 9.48 percentage points quarter-on-quarter.

Sales of the 16 series exceeded last year's figures, and iPhone revenue has recovered.

By business segment, in FY24Q4, the company's hardware business achieved total revenue of $66.96 billion, up 4.1% year-on-year, while service business revenue reached $24.97 billion, up 11.9% year-on-year. Specifically for hardware products, in FY24Q4, the company's revenue from iPhone/Mac/iPad/other products was $46.2 billion/$7.7 billion/$7 billion/$9 billion, with corresponding year-on-year growth rates of +5.5%/+1.7%/+7.9%/-3%. Among them, the iPhone 15 series performed better than last year's 14 series, and the new iPhone 16 series also showed excellent sales, collectively supporting revenue growth in the iPhone business. The Mac business performed relatively steadily, driven by the new MacBook Air, while the iPad business became the fastest-growing hardware category in a single fiscal quarter due to the new iPad Pro and Air models released this year, which filled the demand accumulated from last year's lack of new updates. **

Revenue in multiple regions reaches a new high in Q4, with the decline in Greater China narrowing quarter by quarter.

By region, revenue from the Americas/Europe/Greater China/Japan/Other Asia-Pacific regions was $41.66 billion/$24.92 billion/$15.03 billion/$5.93 billion/$7.38 billion, with corresponding year-on-year growth rates of +3.9%/+11.0%/-0.3%/+7.6%/+16.6%. Among these, revenue from the Americas, Europe, and Other Asia-Pacific regions reached a new quarterly high in Q4. Although Greater China is the only market where the company experienced a revenue decline, the rate of decline has narrowed quarter by quarter.

Thanks to Apple Intelligence, the upgrade rate of iOS 18.1 far exceeds that of iOS 17.1.

Recently, Apple pushed the official system updates for iOS 18.1, iPadOS 18.1, and macOS Sequoia 15.1 to users, with related features of Apple Intelligence officially launched, supporting functions such as AI writing assistants and intelligent photo album search. Thanks to these AI features, the user upgrade rate for iOS 18.1 is twice that of iOS 17.1 during the same period last year. iOS 18.2 is planned for release at the end of 2024, and it is expected to introduce more new tools similar to Image Playground. Meanwhile, Apple has also updated new products such as the MacBook Pro, Mac mini, and iMac equipped with the M4 series chips.

Investment Recommendation: Currently, Apple continues to increase its investment in AI, with both software and hardware making joint efforts. Combined with Apple's strong brand influence and ecosystem, it is expected to lead the wave of AI terminal upgrades. Considering the high standards of AI for the performance and quality of terminal product components, the relevant component sectors are likely to see an increase in unit value, and related industry chain companies are expected to continue benefiting. It is recommended to pay attention to companies in the industry chain such as Luxshare Precision (002475.SZ), GoerTek (002241.SZ), Lens Technology (300433.SZ), Lixun Precision (002600.SZ), Dongshan Precision (002384.SZ), Pengding Holdings (002938.SZ), Zhuhai Guanyu (688772.SH), and Xinwei Communication (300136.SZ).

Risk Warning:

1. Product technology update risk: The electronics industry experiences rapid product technology upgrades, with new technologies and processes emerging continuously. If the company fails to continuously update competitive products, it will weaken the company's competitive advantage.

2. Macroeconomic fluctuation risk: If global economic growth slows, market demand will inevitably experience a slowdown or even shrink, leading to a decline in global consumer electronics demand. The recovery of the consumer electronics industry is expected to be less than anticipated.

3. Trade friction risk: If trade protection policies are implemented in various regions, it may impact the performance of related companies