Event: Anlu Technology released its half-yearly report on August 25, 2023. In the first half of 2023, the company achieved an income of 404 million yuan (YoY-21.68%) and a net profit of-80 million yuan, a year-on-year loss, and a non-return net profit of-100 million yuan. Corresponding to the Q2 single quarter of 2023, the company realized income of 217 million yuan (YoY-15.99%,QoQ+15.6%), net profit of-29 million yuan (year-on-year loss, month-on-month reduction), and non-return net profit of-43 million yuan (year-on-year loss, month-on-month loss reduction).

The industry cycle is down, and profits are under short-term pressure. In the first half of 2023, affected by the continued downturn in terminal market demand, while some of the company's new products or models are still in the introduction period, the company's overall product shipments and revenue have declined compared with the same period last year, and profitability is under short-term pressure. In the first half of 2023, the company's sales gross profit margin was 36.49%, down 0.7 pct from the same period last year; the net sales profit margin was-19.87%, turning to a loss over the same period last year, mainly because the company's revenue declined while expenses continued to grow. In the first half of 2023, the company's sales, management, research and development, and financial expenses totaled 251 million yuan, up 47.28% from the same period last year, and the expense rate totaled 62.43%, increasing 29.23pct over the same period last year.

FPGA has a broad space for long-term development, and the company's product matrix is constantly enriched. FPGA/FPSoC has the advantages of flexible design, strong compatibility, strong applicability and parallel computing, and is widely used in industrial control, communications, consumer electronics, data center, automotive electronics and other markets. With the continuous emergence of new application scenarios such as new generation communications, computing acceleration, new energy, autopilot, high-end industry and other emerging application scenarios, the construction of localized security supply chain in China is accelerated, and there is a broad space for the development of domestic FPGA/FPSoC industry in the long run. As a leading supplier of FPGA chips in China, Anlu Technology continues to enrich its product layout. At present, it has formed a FPGA product matrix composed of PHOENIX high-performance, EAGLE high-efficiency, ELF low-power product family, a constantly improving FPSoC product matrix based on EF2M45 chips and the SWIFT family for industrial and video interfaces, and a full-process dedicated EDA software tool chain that supports the above product matrix. The logical scale, functional modules and performance indicators of product coverage are constantly improving. In the first half of 2023, the company's new products meet end customer expectations, and significant progress has been made in customer introduction, which is expected to promote the company's sales revenue to resume growth in the future.

High-intensity R & D investment, the marketing effect is remarkable. The company adheres to market demand-oriented and maintains high-intensity R & D investment. in the first half of 2023, the company's R & D expenditure was 208 million yuan, an increase of 40.6% over the same period last year, accounting for 51.48% of sales revenue. under the high-intensity R & D investment, the company has made positive breakthroughs in new product development and core technology research and development. At the same time, the company strengthens marketing and sets up sales and technical support teams in Shanghai, Beijing, Shenzhen, Wuhan, Xi'an, Chengdu, Nanjing and other places to improve customer support ability. at present, the company's new products have been introduced and tested in a number of customers. it is making good progress and is expected to bring new growth points for the company.

Investment suggestion: considering the company's performance in the first half of the year, it is estimated that the company's revenue for 23-25 years will be 1.683 billion yuan, respectively, and the PS corresponding to the current market capitalization will be as much as 16-13-10. Considering the high-tech barriers and high growth of the company as a domestic FPGA manufacturer, and with the gradual improvement of the company's product layout and the continuous breakthrough of high-end products, the market share is expected to continue to increase and maintain the "recommended" rating.

Risk tips: the risk of increased competition in the industry; the risk that new product research and development is not as expected; the risk of fluctuations in upstream raw materials and wafer manufacturing and closed test supply; and the risk of loss of R & D personnel.