Event: The company released its 2022 annual report and the first quarter report of 2023. The company achieved revenue of 1,042 million yuan in 2022, an increase of 53.57% over the previous year; realized net profit of 60 million yuan, an increase of 293.94% over the previous year; realized non-net profit of 0.7 million yuan, an increase of 111.64% over the previous year; the company achieved revenue of 188 million yuan in Q1 2023, a decrease of 27.38% over the previous year, a decrease of 23.36% over the previous year; achieved net profit of 51 million yuan, a decrease of 388.30% over the previous year; achieved a deduction of non-return profit of 0.07 million yuan, an increase of 388.30% over the previous year Net profit of the parent was -57 million yuan, a year-on-year decrease of 469.48%.

The increase in FPGA sales led to a high increase in revenue, and profit in '22 turned into a profit: The company's revenue grew rapidly in 2022. The main reasons were: (1) the company continued to enrich the product matrix, continuously optimize product performance, expand product application fields, and the continuous expansion of FPGA product market coverage; (2) as market competitiveness and influence continued to increase, the company's customer demand continued to grow, which in turn drove the company's revenue growth. In 2022, the company's net profit and net profit after deducting non-net profit turned a year-on-year loss into a profit. This was mainly due to the continuous increase in operating income, the continuous optimization of the company's product structure, a marked increase in the sales share of high-margin products, and a year-on-year increase in overall gross margin. By product, FPGA product revenue was 999 million yuan, up 53.96% year on year, accounting for 94.90% of revenue, with a gross margin of 39.13%; FPSoC product revenue was 39 million yuan, up 119.22% year on year, accounting for 3.76% of revenue, and gross margin was 47.51%. The company's comprehensive gross margin in 2022 was 39.81%, an increase of 3.57 pct over the previous year; the net interest rate was 5.74%, an increase of 10.29 pct over the previous year. Net interest rates increased sharply, and major companies received a sharp increase in revenue from government subsidies and compensation. In terms of expenses, the company's sales, management, R&D and financial expenses rates for the full year of 2022 were 2.12%/4.51%/31.83%/-0.59% respectively. The year-on-year changes were -0.68/-1.58/-4.07/-0.42pct respectively. The company's fee control results were remarkable.

Innovative technology drives development, and new products help revenue growth: Since its establishment, the company has always been committed to innovative technology and product development in the FPGA field, guided by market demand and driven by independent innovation. With deep FPGA technology reserves and persistent technical research, the company has continuously launched chip products with strong competitiveness in terms of performance, power consumption, and quality. In 2022, the company's FPGA series and FPSoC series released 6 new products from the SALPHOENIX, SALELF, and SALSWIFT families, including 2 automotive-grade FPGA chips to expand the product line to meet a wider range of market needs; the company developed IP and solutions covering many application scenarios to improve customer satisfaction and speed up customer introduction; the company's R&D projects for next-generation FPGA chips, FPSoC chips, FPSoC software, FPSoC software, etc., progressed smoothly and made continuous breakthroughs Advanced technology and high-end products. In 2022, the company actively expanded the market for new products and introduced users based on customer resources accumulated in the fields of industrial control, network communications, consumer electronics, data centers, etc. The company's new products are expected to achieve large-scale sales in the third and fourth quarters of 2023.

Domestic demand for FPGA chips is strong, and the FPGA chip field continues to expand: According to Frost&Sullivan's forecast, FPGA chip sales in the Chinese market will reach 33.22 billion yuan in 2025, and CAGR will reach 17.1% from 2021 to 2025. On the basis of the continuous development of China's traditional electronic information industry, combining network powers, manufacturing powers, and implementation of the “double carbon” strategy will further stimulate potential demand in the integrated circuit market. With the steady development of downstream industries and the upgrading of information technology, new application scenarios continue to emerge, the construction of a localized security supply chain in China has accelerated, and demand in the domestic FPGA chip market is strong. In terms of FPGA hardware design technology, the company continues to carry out research and innovation in the fields of chip architecture, basic circuit modules, manufacturing process adaptation, etc., and has achieved technological breakthroughs in logic units, signal interconnection, clock networks, high-speed interfaces, etc. In terms of FPGA-specific EDA software technology, the company has continuously improved its self-designed FPGA-specific EDA software system to support the company's full range of FPGA chip products. The company's ELF2 family products are positioned in the low-power programmable market and are mainly used in the fields of consumer electronics and network communication.

The company's ELF3 family of products is positioned in the industrial control, network communication, data center and other functional expansion application markets. It supports 475 user IOs to meet the diverse application needs of customers for board-level function expansion. The company's EAGLE4 family products are positioned in the cost-effective logic control and image processing market, and are mainly used in industrial control, network communications, and data centers. The company's PHOENIX family of products is positioned in the high-performance programmable logic market, with rapid sales growth and relatively high gross margin, and gradually opening up the middle and high-end markets; SALPHOENIX high performance product series and SALEAGLE high efficiency product series SALELF low power consumption product series are used by industrial control customers. With the gradual release of the company's PHOENIX products in the middle and high-end markets, the company's performance is expected to reach a higher level.

First coverage, giving an “increase in holdings” rating: The company's main business is R&D, design and sales of FPGA, FPSoC chips, and special EDA software products, and is a leading FPGA chip supplier in China. The company's differentiated product range and continuously rich product models, application IP and reference designs enable the company to better cover the needs of downstream customers. The products have been widely used in industrial control, network communications, consumer electronics, data centers and other fields. According to the different requirements of customers in different fields in terms of chip specifications, packaging methods, performance indicators, etc., the company provides various product models and application reference designs for the PHOENIX, EAGLE, ELF, and SWIFT families in the two categories of FPGA and FPSoC, with different characteristics, and also provides TangDynasty software that supports FPGA development and FutureDynasty software that supports FPSOC development. Benefiting from strong demand in the domestic FPGA chip market and the continuous release of new products in the middle and high-end markets, the company's performance is expected to reach a higher level. The company's net profit for 2023-2025 is estimated to be 88 million yuan, 158 million yuan and 220 million yuan respectively; EPS is 0.22 yuan, 0.40 yuan, and 0.55 yuan respectively; PE is 230X, 127X, and 91X respectively.

Risk warning: the risk of macroeconomic fluctuations, the risk of downstream demand falling short of expectations, the risk of technology development and iterative upgrading, and increased market competition.