Incidents: On April 26, the company released its 2022 annual report and the first quarterly report of 2023. It achieved revenue of 2.175 billion yuan in 2022, an increase of 6.91% over the previous year; the net profit of the mother was 462 million yuan, a decrease of 16.05% over the previous year; after deducting non-net profit of 365 million yuan, a decrease of 5.41% over the previous year. Q1 of 2023 achieved revenue of 514 million yuan, a year-on-year decrease of 10.37%, an increase of 17.20%; Guimu's net profit was 89 million yuan, a year-on-year decrease of 40.91%, an increase of 267.98%; after deducting non-net profit of 76 million yuan, a year-on-year decrease of 40.09% over the previous year, turned a loss into a profit.

The decline in product prices affected profit performance, and Q1 performance improved month-on-month: In 2022, the company strengthened the “market+technology” two-wheel drive, achieved a breakthrough in key customer expansion, and further expanded the market size. Continued development of the product and solution business led to revenue growth. At the same time, due to changes in market demand, the decline in sales prices of some consumer products affected performance. The impact of falling product prices continued until Q1 of '23, and performance continued to be under pressure year on year, improving month-on-month. The gross margin in '22 was 38.85%, down 3.21pct from the previous year; the net interest rate was 21.35%, down 6.62pct from the previous year. The gross margin for Q1 in '23 was 33.14%, down 10.99 pct from the previous year and up 11.83 pct from the previous year; the net interest rate was 15.90%, down 11.30 pct from the previous year, up 12.48 pct from the previous month. In terms of expenses, the Q1 sales, management, R&D, and financial expenses rates were 1.64%/9.30%/11.05%/-6.92%, respectively. The year-on-year changes were 1.08/2.46/2.79/-2.67pct respectively. The year-on-year increase in cost rates during the period suppressed profit performance.

The scale of the product and solution business has steadily increased, and the special integrated circuit business continues to gain strength: the company's products and solutions segment mainly adopts the IDM business model. The main products include discrete devices and analog integrated circuits, special integrated circuits and devices. The company is deployed in multiple segments to form a series of products: a complete range of digital transistor products and high accuracy, with shipments of more than 2.2 billion units in '22; the company is a major domestic ECM preamplifier shipper, with shipments of more than 3.3 billion units in '22; the capacitance value of surge protection devices can reach as low as 0.2pF. They are widely used in high-speed data transmission ports. In the field of domestic special integrated circuits and device applications, the company has shipped more than 2.6 billion units in 22, of which low-capacitance products account for more than 15%; in the field of domestic special integrated circuits and device applications, the company has been deeply involved in domestic integrated circuits and device applications for decades. First engaged in special optoelectronics and special applications It is one of the companies that develops discrete devices, special CMOS logic circuits, special power management circuits, and special hybrid integrated circuits. Its products are widely used in special fields such as instrumentation, communication transmission, remote sensing telemetry, waterway transportation, and land transportation. The company has relatively complete basic capabilities in design and manufacturing, package testing, reliability testing, failure analysis and quality evaluation, and is an important supplier of special integrated circuits and devices in China. Relying on its own customer advantages and rich technology accumulation, the company is expected to continue to consolidate and expand its share of the specialty market and help the company's revenue scale grow steadily.

The new 12-inch production line is about to be mass-produced, and new product development is progressing steadily: the company's manufacturing and service sector focuses on providing semiconductor open wafer manufacturing and package testing services. The company has developed and mastered a number of sealing and testing technologies, mainly including: ultra-small chip high-precision chip adhesive technology, which can achieve high-speed adhesion of ultra-small chips (0.19*0.19mm); ultra-small pad size bonding technology, which can achieve ultra-thin packaging with a minimum thickness of 300 μm; multi-chip adhesive technology and multi-layer arc control technology, which can achieve multi-pin integrated circuit packaging. In terms of new product development, the company's 6-inch SiCSBD products have been mass-produced on a small scale, and the first sample of 1200VSiC MOSFET is in the performance evaluation stage. In terms of production capacity layout, the company has an 8-inch wafer production line and a 6-inch wafer production line. By the end of 2022, the production capacity of the 8-inch wafer production line reached 50,000 pieces/month; the production capacity of the 6-inch wafer production line reached 65,000 pieces/month; a 12-inch wafer production line is under construction according to the plan. The first stage is expected to be trial production in April 2023, and the product production is expected to be completed in July 2025. The second phase is expected to focus on power semiconductors, optoelectronics, ASIC, etc. R&D. The new production line is expected to contribute an additional amount to the company's revenue and performance after delivery.

First coverage, giving an “increase in holdings” rating: the company's main business is divided into two categories: products and solutions, and manufacturing and services. Among them, the product and solution business operates under the IDM model, and there are many product categories, mainly used in consumer electronics, automotive electronics, new energy, power electronics, communications and smart terminals, special applications, etc.

The manufacturing and service sector mainly provides customers with services such as power devices and power management ICs, and focuses on providing semiconductor open wafer manufacturing and package testing services. We are optimistic about the company's accumulation of customer resources and technology in the field of special integrated circuits, and the market share is expected to continue to increase; the company's new 12-inch wafer production line will soon reach production, which is expected to create a new performance growth point for the company. The company's net profit for 2023-2025 is estimated to be 414 million yuan, 452 million yuan and 618 million yuan respectively, EPS is 0.35, 0.38, and 0.52 yuan respectively, and PE is 70X, 64X, and 47X respectively, giving a “increase in holdings” rating.

Risk warning: downstream demand falls short of expectations; customer expansion falls short of expectations; industry competition increases risks; capacity construction progress falls short of expectations.