Event: The company released its 2023 interim report

23H1 performance was in line with expectations, and 23Q2 profitability improved month-on-month. 23H1, the company achieved revenue of 1.08 billion yuan, YoY -6%, net profit of 270 million yuan, YoY -13%, mainly due to the decline in sales prices of some consumer products dragging down performance; 23Q2, the company achieved revenue of 570 million yuan, YoY -2%, QoQ +11%, gross profit margin of 180 million yuan, YoY +15%, QoQ +100%, 23Q2 gross profit margin of 38.4%, +5 pct, net interest rate of 30.7% month-on-month, +15 pct, 23Q2, the main improvement in profitability At the company Carrying out comprehensive lean management and improving operation and management efficiency is expected to smooth out cyclical fluctuations in performance to a certain extent during the period of changes in the market environment and the construction of fund-raising and investment production lines.

Special business: The IDM model meets autonomous and controllable needs, and growth of old customers and new categories can be expected.

23H1's special business grew steadily, driving the product and solution business to reach 680 million yuan in revenue, an increase of 16%. The company has been deeply involved in the special field for more than 30 years, and its customers have been stable for a long time. Its main products include optoelectronics and discrete devices, digital integrated circuits, analog integrated circuits, and hybrid integrated circuits.

There is a strong demand for autonomy and control in the special market. The company is expected to rely on special IDM capabilities to deeply benefit from the trend of localization of special electronics and achieve steady growth in the special IC business.

Foundry business: Domestic equipment foundry test line, 12-inch production line construction is progressing steadily. The company's foundry production line uses domestically produced integrated circuit equipment on a large scale, and has outstanding autonomy and controllability. 23H1. Due to the impact of falling product prices in the consumer electronics market, the company's manufacturing and service business achieved revenue of 370 million yuan, a decrease of 33%. The company currently has 6-inch and 8-inch wafer production lines. The 12-inch wafer production line under construction was launched in April '23, and the yield of the first power device has met expectations. The wafer foundry production line has now successfully developed power devices, BCD, and MEMS process technology. On the product side, 1200V IGBT and FRD products have achieved mass production and passed NEV customer certification. The silicon optical process platform already has an optical communication product that has entered the sample trial production stage, and at the same time, a number of 6-inch SiC SBD products are being delivered in small batches.

Profit forecast and investment rating: The company's special integrated circuit and device business is growing steadily, and the construction of a 12-inch wafer production line is progressing steadily. Based on this, we maintain the company's profit forecast. The net profit for 23-25 was 3.6/45/550 million yuan. The current market value corresponding to PE is 83/68/55 times, respectively, maintaining the “buy” rating.

Risk warning: Special business growth falls short of expectations; new 12-inch production line commissioning falls short of expectations; market competition intensifies.