2Q23: revenue quarter-on-quarter improvement, PHOENIX series share further increased

The company's 2Q23 realized revenue of 217 million yuan (yoy:-15.99%,qoq:+15.6%), which was in line with our previous expectation of 216 million yuan, while the net loss of its parent was 29.3241 million yuan (yoy:-246.33%,qoq:+42.51%), deducting a non-net loss of 43.1935 million yuan (yoy:-890.51%,qoq:+24.39%).

The decline in 2Q23 revenue compared with the same period last year is mainly due to: 1) the lack of demand in the communications and industrial control market led to a decrease in shipments compared with the same period last year; 2) many new products of the Phoenix series are still in the introduction period and have not yet formed large-scale sales. But revenue has returned to moderate growth on a month-on-month basis and is expected to accelerate improvement in the second half of the year as new products are released. In addition, 2Q23 has not yet returned to profitability due to the relative rigidity of R & D costs and the slight decline in comprehensive gross profit margin compared with the previous month as a result of price reductions in some products. Considering that the communications / industrial control market is still digesting inventory in the second half of the year, and the pace of recovery of downstream demand is relatively slow, we expect the company's revenue in 23-25 years to be 10.05x150823PS. As a scarce FPGA supplier in China, the company is given 25x 23PS (comparable company 23x 23PS) with a target price of 62.70 yuan, with a "buy" rating.

2Q23 recalled: the demand in the communications / industrial control market is still insufficient, the inventory is expected to peak in the second quarter and in the first half of the year, communications and industrial control customers are still digesting inventory, and overseas FPGA suppliers increase their investment in the Chinese market after production capacity has been alleviated, and the company reduces the prices of some products to cope with changes in the market environment, resulting in a reduction in 2Q23 gross profit margin to 35.8% (yoy:-2.6pct,qoq:-1.5pct). But revenue still rose 15.6% to 217 million yuan. From the perspective of product structure, the company's high-performance product PHOENIX series revenue accounted for a further increase in the second quarter compared with the previous quarter, and continue to promote the customer introduction process of new products, and is expected to start volume in the second half of the year. 1H23's R & D expenditure reached 208 million yuan (yoy:+40.5%), and the number of R & D personnel increased by 30.18% year-on-year to 371 by the end of the second quarter. In terms of inventory, the company's inventory was 782 million yuan at the end of the second quarter, an increase of 94 million yuan compared with the end of the first quarter, and the inventory turnover days dropped slightly to 471. the inventory level is expected to peak in the second quarter and begin to decline in the second half of the year.

Outlook for 23 years: PHOENIX series of new products began to release, and revenue in the second half of the year is expected to maintain a ring-on-month growth trend. 2Q23's revenue has improved month-on-month and is expected to pick up gradually in the second half of the year, mainly because: 1) the new generation of high-capacity products were not promoted on a large scale due to production capacity last year, and will be applied on a large scale in communications and other fields in the second half of the year. 2) the customer introduction of Phoenix series of small and medium logic capacity new products has been completed one after another, and it is expected to start batch shipment in 3Q23. In terms of new products, the company will accelerate the PHOENIX2 testing and certification work this year, and continue to promote the research and development of high-capacity FPSoC products. In the past 22 years, the company has released two car gauge-level FPGA products, and this year it will continue to expand its product line and achieve horizontal expansion in the field of application.

Investment suggestion: target price 62.7 yuan, maintain "buy" rating considering that the communications / industrial control market is still digesting inventory in the second half of the year, downstream demand recovery pace is slow, we downgrade 23-25 revenue forecast. The current pact S (18x) is 43% lower than the historical average, and the stock price may fully reflect pessimistic expectations for the FPGA market. Considering that the release of FPSoC and Phoenix high-end products is expected to open up the company's market space, we still give a "buy" rating.

Risk tips: market competition intensifies, R & D and new product promotion are not as expected, and customer concentration is high.