Event: The company released its 2022 annual report and the first quarter report of 2023. The company achieved revenue of 2,044 million yuan for the full year of 2022, an increase of 0.98%; realized net profit of 399 million yuan, a decrease of 45.29% over the previous year; realized non-net profit of 330 million yuan, a decrease of 16.93% over the previous year; the company achieved revenue of 395 million yuan in Q1 2023, a year-on-year decrease of 11.61% and a decrease of 36.03% over the previous year; achieved net profit of 33 million yuan, a year-on-year decrease of 77.21%, an increase of 19.90% over the previous year; Net profit of 27 million yuan after deducting non-return to the mother was achieved, down 71.27% year on year and 61.49% month on month.

Demand in the semiconductor market is weak, and short-term profits are under pressure: the company's profits were under short-term pressure in 2022. The main reasons were: (1) the semiconductor market was sluggish in 2022, domestic demand was relatively weak, and integrated circuit production declined sharply; (2) the company continued to increase investment in R&D. The company's comprehensive gross margin in 2022 was 34.09%, down 0.04 pct from the previous year; the net interest rate was 19.55%, down 16.88pct from the previous year. The net interest rate declined sharply. The main reasons were: (1) the company's investment income declined sharply, (2) the company's inventory price drop losses increased, and (3) the company's non-operating expenses increased dramatically. In terms of expenses, the company's sales, management, R&D, and financial expenses rates for the full year of 2022 were 3.02%/3.76%/12.63%/-2.70%, respectively. The year-on-year changes were +0.35/-0.80/+3.90/-0.63pct, respectively. The change in the company's R&D expenses is mainly due to the increase in the company's R&D investment, and the company continues to increase its investment in research and development of new power management products.

New products continue to break through, and technical strength continues to increase: the performance and quality of the company's power management products are benchmarked against world-class analog manufacturers, and some key performance indicators are superior to similar products at home and abroad. The company launched ultra-low noise high-PSRR LDO for security cameras and precision inspection equipment and LDO for DDR front-end and back-end power supply, and continued to improve power management products applied to DDR. The company continues to make breakthroughs in its new power management products: in the automotive electronics market, the company focuses on developing power management chips applied to automotive lighting. A variety of power products have been introduced to car manufacturers to achieve batch supply, focusing on serial research and development of LDO and LED drive products, and will continue to gain strength in the automotive electronics market in the future; medium and high voltage step-down DC-DC products have achieved breakthroughs in the communications, home appliances, security and meter markets, introducing many benchmark customers; the company's step-down DC-DC products have achieved technological breakthroughs in the direction of high current. The company continues to follow market trends, enhance its technical strength, enrich its product range, increase the development of high-end products, such as low-temperature drift LDO, multi-phase DC-DC, drive gallium nitride AC-DC, LED display drivers, etc., and continue to increase the proportion of car-grade power management products. The company optimized the product market layout for the middle and high-end power management market, and automotive electronics and industrial control developed in both directions: According to SNE Research, the size of the global electric vehicle market will increase to 121 billion US dollars in 23, and reach 616 billion US dollars in 2035, and the penetration rate is expected to reach about 90%. According to IC Insights forecasts, China's industrial semiconductor market will grow at a compound annual growth rate of 7% from US$10.733 billion to US$14.584 billion in 2019-2023. The company continues to further develop the automotive electronics and industrial control markets to further improve the product market layout. Power chain: The company's power device business is positioned to provide high-reliability power device products for applications in the field of industrial control and automotive electronics. The company continues to promote the development and industrialization of high-end IGBTs and MOSFETs, and has launched a variety of advanced groove-gate cut-off IGBTs, shielded gate power MOSFETs, and super junction power MOSFET products, covering various segments of the 30V to 1500V voltage range and 5A to 300A current range. The parameter performance of some products is comparable to similar products from foreign first-tier brands. Signal chain: The company continues to iterate and upgrade EEPROM series products and continuously improve product competitiveness. A new generation of EEPROM products based on the I2C protocol has been updated, and a series of EEPROM products with standards such as SPI and Microwire, which are mainly used in automotive fields, have also been designed.

The company promotes research and development of car-grade EEPROM products. A number of mainstream capacity car-grade EEPROM products are undergoing A1 grade AEC-Q100 certification, and some products have already passed the assessment and are being delivered in batches. The company is focusing on improving the reliability of EEPROM products. Industrial-grade products can be erased up to 4 million times at room temperature, and have been widely used in electricity meters and other fields. The company concentrates its business resources to accelerate the transformation and upgrading of the company's products into the fields of industrial control and automotive electronics applications, which is expected to become the company's new profit growth in the future.

First coverage, giving an “increase in ownership” rating: The company is an integrated circuit design enterprise that provides analog and digital-analog hybrid integrated circuit and system solutions. The company focuses on integrated circuit chip design and product application development. The company's integrated circuit product business is located in 2 categories and 8 product segments: power chain (power management, power devices, motor drive business) and signal chain (data converters, power special chips, IoT front-end, non-volatile memory, standard signal product business). Product customers are mainly concentrated in automotive electronics, industrial control, photovoltaics, energy storage, energy efficiency monitoring, power equipment, optical communications, home appliances, short-range vehicles, high-end portable and medical equipment markets, and other consumer application markets such as mobile phone camera modules . Benefiting from the development trend of automobile electrification, intelligence and integration, the company's performance is expected to reach a higher level as the scale of the automotive electronics market continues to expand and downstream demand is strong. The company's net profit for 2023-2025 is estimated to be 498 million yuan, 657 million yuan and 702 million yuan respectively, EPS is 0.70 yuan, 0.92 yuan, and 0.99 yuan respectively, and PE is 27X, 20X and 19X 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.