Event: according to the company's semi-annual report for 2023, the revenue of H1 company in 2023 was 5.03 billion yuan, down 2.25% from the same period last year; the net profit was 778 million yuan, down 42.57% from the same period last year; and 732 million yuan was deducted from non-net profit, down 43.97% from the same period last year. On a quarterly basis, Q2 achieved revenue of 2.683 billion yuan in 2023, up 1.97% from the same period last year and 14.37% from the previous year; the net profit from home was 398 million yuan, down 45.89% from the same period last year, up 4.51% from the previous quarter; and deducting 396 million yuan from non-net profit, down 43.91% from the same period last year and 17.85% from the previous year.

Performance is under short-term pressure, and R & D investment continues to increase: in the first half of 2023, the domestic semiconductor market was periodically affected, and the end market in consumer areas such as smartphones and PC was weak, but applications such as automotive electronics and new energy still grew. In 23, H1 company's gross profit margin was 34.30%, year-on-year-3.17pcts; net profit margin was 15.15%, year-on-year-10.88pcts. Q2 gross profit margin is 33.85%, year-on-year-4.54pcts, month-on-month ratio-0.95 pcts; net profit rate is 14.50%, year-on-year-13.22pcts, month-on-1.38pcts. In terms of expenses, the rates of sales, management, R & D and financial expenses of H1 Company in 23 years were 1.62%, 6.16%, 10.87% and 3.08%, respectively, and the year-on-year changes were + 0.22/+1.59/+3.40/-0.03pcts, respectively. The change in management expenses is mainly due to the increase in management costs due to the launch of new businesses such as Shenzhen 12-inch line and closed test base. The change in R & D expenses is mainly due to the closure of the test base, the development of new businesses such as new mergers and acquisitions, and the increase in labor costs, including equity incentives.

Speed up the expansion of the automobile-new energy field, fill the domestic technology gap: the company continues to enrich the product range, optimize the product structure, and expand downstream application fields. In 2023, the overall pan-new energy sector (vehicles and new energy) accounted for 39% of the terminal applications downstream of the company's products and solutions plate. The company has completed the development of many models of module products in four application fields, such as welding machine, frequency converter, photovoltaic and new energy vehicle electric drive, and launched high-power module products such as 750V 820A automobile main drive module and 650V 450A photovoltaic inverter module. Chongqing 12-inch products steadily increased, two over-finished products passed the reliability assessment and began to send samples, one of which has passed customer verification and began to ship in small batches. At the same time, complete the development of 36V high-precision bipolar simulation IC process platform, improve and establish a standard design service platform. At present, the customer's first version of the product has been completed, and the product verification and trial production are in progress; DrMOS products have completed the monomer and closure tests of the two versions, and are currently tested and verified on the client side, and the products and processes will fill the domestic gaps and break the monopoly of international companies in the domestic market, which is conducive to promoting the localization of high-precision operational amplifier products. 0.11um CMOS EN project achieves the device standard in the pre-research phase, completes the first version of the model and PDK;0.11um BCD pilot products through product verification, waiting for customers to mass production.

The company's industrial control and automotive electronics market sales accounted for more than 85%, products successfully introduced into automotive, photovoltaic field leading / benchmarking customers and achieve batch supply, resulting in rapid growth of sales scale.

Multi-field forward-looking layout acceleration, help the company's long-term development: the company around the overall strategy, continue to expand. At present, the company has a 6-inch wafer manufacturing capacity of about 230,000 wafers / month, an 8-inch wafer manufacturing capacity of about 140,000 wafers / month, and a 12-inch wafer manufacturing capacity of about 40,000 wafers / month. Chongqing 12-inch wafer production line is in the climbing stage, with a full range of large-scale manufacturing services for customers. At the same time, the company successfully introduced the second phase of the National Integrated Circuit Industry Investment Fund Co., Ltd. to increase the capital of Runan Technology by 1 billion yuan to jointly build a closed test base for power semiconductors. This capital increase will help to enhance the supporting capacity of the company's power semiconductor products business development, enhance the scale and technical level of power semiconductor packaging, and consolidate the competitive advantage of power semiconductors. In order to further improve the efficiency of the use of the funds raised, the company intends to change the use of the raised funds of RMB 2.3 billion to the fixed assets investment part of the new project "China Resources Microelectronics Shenzhen 300mm Integrated Circuit production Line Project", so as to enhance the company's core competitiveness and establish long-term development momentum.

Downgrade earnings forecast and maintain "overweight" rating: we are optimistic about the continued growth of global demand for power semiconductors and the market demand brought about by domestic substitutions. The company is the leader in domestic semiconductor IDM, and its products focus on the field of power semiconductors. It is expected to benefit from the performance growth brought about by strong downstream demand, product structure optimization and capacity improvement. Due to the decline in the size of the global semiconductor market compared with the same period last year, and the company's increased investment in research and development, with the gradual launch of new businesses such as the Shenzhen 12-inch line and the closed test base, which may affect the company's profitability in the short term, so lower the profit forecast. It is estimated that the return net profit of the company from 2023 to 2025 is 1.928 billion yuan, 2.468 billion yuan and 2.776 billion yuan respectively, the EPS is 1.46,1.87 yuan and 2.10 yuan respectively, and the PE is 40x, 31x and 27x respectively.

Risk tips: demand for power semiconductors is lower than expected; technology research and development is not as expected; product prices are not as expected; capacity expansion is not as expected.