What happened: the company recently released a semi-annual report on 2023, with revenue of 404 million yuan in the first half of 2023,-21.68% year-on-year, net profit of-80 million yuan, year-on-year-312.90%, and non-return net profit of-100 million yuan,-579.42%. Revenue in the second quarter of 2023 was 217 million yuan,-15.99% year-on-year, + 15.60% compared with the same period last year; net profit from home was-29 million yuan, year-on-year-246.33%, month-on-quarter 42.51%; net profit from non-return to home was-43 million yuan, year-on-year-890.51%, month-on-month 24.39%.

Main points of investment:

23H1 revenue fell compared with the same period last year, and profitability was under pressure. Affected by the fluctuation of the industry boom and the sluggish demand in the end market, the company's overall shipments of 23H1 products have declined compared with the same period last year, and many new products or models are still in the introduction period, resulting in a decline in 23H1 revenue from the same period last year, and 23Q2 revenue has begun to recover. Due to the decline in demand and the pressure on the prices of some of the company's products, the company's 23H1 gross profit margin was 36.49%, down 0.7% from the same period last year. 23Q2 gross profit margin was 35.78%, down 2.55% from the same period last year, and 1.54% from the previous year. Due to the large increase in 23H1 R & D expenses, 23H1 is not profitable, 23Q2's homing net profit is gradually being repaired, and the company is improving its profit level by increasing the proportion of high-margin products, speeding up the introduction of new products or models, and broadening the product matrix.

Against the trend, 23H1 continues to increase investment in research and development to consolidate its core competitiveness. The company continued to increase investment in product development and team building. 23H1 invested 208 million yuan in R & D, an increase of 40.60% over the same period last year, and the total R & D investment accounted for 51.48% of operating income, an increase of 22.81% over the same period last year. The company carries out project research and development in many fields, such as high-performance and high-capacity FPGA chips, FPSoC chips and advanced technology. In order to ensure that the company's R & D work is carried out in an orderly manner, the company continues to strengthen R & D team building according to demand, and the scale of R & D personnel has increased significantly. 23H1 has a total of 371 R & D personnel, an increase of 30.18% over the same period last year. In the context of the downward business cycle of the semiconductor industry, the company continues to increase R & D investment against the trend to further strengthen and consolidate its core competitiveness for the sake of long-term development.

The company continues to enrich the product matrix, and the new product research and development is progressing smoothly. At present, the company has formed four major product lines: EAGLE, ELF, PHOENIX and FPSoC, each of which continues to develop new products and specifications and continue to iteratively upgrade. The company's products have been widely used in industrial control, network communications, consumer electronics, data centers and other fields, constantly expanding emerging markets. In 2022, the company released six new products of PHOENIX, ELF and FPSoC series. 23H1 completed the research and development of a number of new specifications of PHOENIX and ELF series chips, completed the development of high-capacity and high-performance FPGA chips, completed the research and development of a low-power FPSoC chip and successfully achieved mass production, and made milestone progress in the research and development of high-efficiency FPSoC chips. The company actively promotes the layout of car specification-level products. In 2022, the company released two types of car-gauge-level FPGA chips. 23H1 has completed the research and development of new car-gauge chips and is conducting customer introduction.

Profit forecast and investment advice. Considering that the semiconductor industry is still in a downward cycle, the company's main downstream application areas, network communications and industrial control, are still destocking, and demand recovery is relatively slow. We downgrade the company's 23-24 revenue and homing net profit forecast. We expect the company's 23-24 revenue to be 969cm 1.412 billion yuan (the original value is 1.600pm 2.347 billion yuan). The net profit of homing in 23-24 years is-109000,000 yuan (the original value is 1130.03 million yuan), the additional revenue in 25 years is predicted to be 1.941 billion yuan, the net profit in 25 years is predicted to be 81 million yuan, the corresponding EPS is-0.27 shock 0.00shock 0.20 yuan, and the corresponding PS is 19-13-10 times. Considering that the FPGA industry has extremely high software and hardware ecosystem barriers, the company is the leader of domestic FPGA, with obvious first-mover advantages and smooth progress of new products, providing an important driving force for future growth, the current PS valuation is significantly lower than the historical average level, maintaining the "buy" investment rating.

Risk hint: the R & D progress falls short of the expected risk, the industry competition aggravates the risk, the customer concentration is high, and the downstream demand is lower than the expected risk.