Event: according to the company's semi-annual report on 2023, the revenue of H1 company in 2023 was 1.084 billion yuan, down 6.24% from the same period last year; the net profit returned to the mother was 268 million yuan, down 12.62% from the same period last year; and the non-net profit was 209 million yuan, down 19.88% from the same period last year. From a quarterly point of view, Q2 achieved revenue of 570 million yuan in 2023, down 2.19 percent from the same period last year, an increase of 10.91 percent over the same period last year; net profit returned to its mother was 178 million yuan, up 14.83 percent from the same period last year, up 100.24 percent from the previous quarter; deducting 132 million yuan from non-net profit, an increase of 73.07 percent month-on-month.

Flat demand affects revenue, Q2 profitability improved significantly: H1 revenue and net profit decreased in 2023 compared with the same period last year, mainly due to changes in market demand and the decline in sales prices of some consumer products.

In terms of business, the revenue of H1 product and program business in 23 years was 678 million yuan, an increase of 16.11% over the same period last year, while that of manufacturing and service business was 367 million yuan, a decrease of 32.5% over the same period last year. In 23, the gross profit margin of H1 company was 35.90%, year-on-year-5.98pcts; net profit rate was 23.69%, year-on-year-3.86pcts. Q2 gross profit margin is 38.39%, year-on-year-1.29pcts, month-on-month ratio + 5.25pcts; net profit rate is 30.71%, year-on-year + 2.81pcts, month-on-month ratio + 14.81pctsmai Q2 profitability significantly improved compared with the previous year. In terms of expenses, the rates of sales, management, R & D and financial expenses of H1 company in 23 years were 1.59%, 8.28%, 8.72%, 6.37%, respectively, and the year-on-year changes were 0.49/0.47/1.91/-2.07pcts, respectively. The overall cost control is good. The company continues to increase its R & D efforts, and the cost of H1 R & D in 23 years is 94.5585 million yuan, an increase of 15.8326 million yuan over the same period last year.

The business scale of products and solutions is steadily increasing, and the business of special integrated circuits continues to develop: the company's products and programs mainly adopt IDM business model, with many product categories, which are mainly used in consumer electronics, automotive electronics, new energy, power electronics, communications and intelligent terminals, special and other fields. In the past 23 years, under the guidance of market demand, H1 Company has optimized its product structure and enhanced its market competitiveness. at the same time, it has also made a breakthrough in the expansion of key customers, improved its customer service capacity, and further expanded its market scale. promote the sustainable development of product and solution business. In the application field of special integrated circuits and devices, the company has been ploughing for decades, and is one of the earliest enterprises engaged in the research and development of special optoelectronics, special discrete devices, special CMOS logic circuits, special power management circuits and special hybrid integrated circuits. The products are widely used in instruments, communication transmission, remote sensing, water transport, land transportation and other special fields. The company has relatively perfect basic capabilities of design and manufacture, package testing, reliability test, 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 the special market share and help the company's revenue scale to grow steadily.

The 12-inch production line is connected to the product line, and the research and development of new products is advancing steadily: the company's manufacturing and service plate focuses on providing semiconductor open wafer manufacturing and packaging and testing services. In terms of product research and development, the company's 1200VIGBT and 1200V FRD products have achieved mass production and passed the new energy vehicle customer certification; ultra-low capacitance TVS products have been serialized, and product shipments have increased steadily; a variety of SOI CMOS products have been developed to further broaden the product range, and some of them are supplied in bulk; a kind of optical communication product of silicon optical process platform has been connected with the process and entered the sample batch trial production stage. In terms of capacity layout, the company has an 8-inch wafer production line and a 6-inch wafer production line, a 12-inch wafer production line based on complete sets of domestic equipment is under construction, with a planned production capacity of 40,000 wafers per month, process capacity can reach 65nm, and the product line has been achieved in April 2023, and the yield of the first power device has reached the expected. As the construction of the new production line continues to advance, it is expected to contribute new increments to the company's revenue.

Downgrade the profit forecast and maintain the "overweight" 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 in IDM mode, and there are many kinds of products, which are mainly used in consumer electronics, automotive electronics, new energy, power electronics, communications and intelligent terminals, special and other fields. Manufacturing and service field, mainly to provide customers with power devices, power management IC and other services, focusing on the provision of semiconductor open wafer manufacturing and packaging testing services. We are optimistic about the company's customer resources and technology accumulation in the field of special integrated circuits, and the market share is expected to continue to increase; after the company's new 12-inch wafer production line reaches production, it is expected to create a new performance growth point for the company. It is estimated that the return net profit of the company from 2023 to 2025 is 393 million yuan, 462 million yuan and 579 million yuan respectively, the EPS is 0.33,0.39 and 0.48 yuan respectively, and the PE is 55x, 47x and 38x respectively.

Risk tips: downstream demand is lower than expected; customer expansion is not as expected; industry competition aggravates risks; capacity construction progress is not as expected.