Main points of investment: the net profit of 23Q 2 deducting non-return increased by 12.95% month-on-month, and the in-hand order of RF chip business increased significantly compared with the same period last year.

An one-stop manufacturing platform from wafers to chips. Lion Micro has an upstream and downstream industry chain from semiconductor wafers to semiconductor power devices, and is also involved in the second and third generation compound semiconductor RF chip production lines. the main business includes three major sections. they are semiconductor wafers, semiconductor power device chips, compound semiconductor RF chips. The company's main products include three categories: ①, 6-12 inch semiconductor silicon polishing wafer and silicon epitaxial wafer; ②, 6 inch Schottky chip / FRD/MOSFET/TVS/IGBT chip; ③, 6 inch gallium arsenide microwave radio frequency chip / VCSEL chip, etc.

The net profit of 23Q2 deducted from non-return is 26.5336 million yuan, an increase of 12.95% over the previous month. The company's 23H1 realized 1.342 billion yuan, down 14.22% from the same period last year; the net profit returned to the mother was 174 million yuan, down 65.49% from the same period last year; and the net profit after deducting non-return was 50.0252 million yuan, down 89.00% from the same period last year. The reasons for the decline in profits include: the decline in the prosperity of the ① and semiconductor industry, and the weak market demand, resulting in a decrease in sales orders for some of the company's products and a reduction in the prices of some products. Some of the investment projects of ② and 2021 non-public offerings began to switch to production in June 2022, and the plant and equipment of Jiaxing Jinruihong acquired in March 2022 were gradually converted to production since April 2022, and the corresponding fixed costs such as depreciation expenses increased significantly; the convertible bonds issued by ③ and November 2022 provided 62.36 million yuan in financial expenses in accordance with the requirements of accounting provisions.

From a quarterly point of view, 23Q2 realized income of 710 million yuan, down 12.17% from the same period last year, and increased by 12.30% from the same period last year; after deducting non-return, the net profit was 26.5336 million yuan, down 88.00% from the same period last year, and up 12.95% from the previous year.

Silicon epitaxial wafers, power semiconductor devices capacity utilization is sufficient, RF chip business orders increased significantly compared with the same period last year, losses have been reduced. The revenue of ① and semiconductor wafer business was 755 million yuan, down 18.48% from the same period last year. The revenue of X 23Q2 in a single quarter was 402 million yuan, an increase of 13.97% over the previous quarter. Among them, the capacity utilization of silicon polishing wafers has declined due to the decline in consumer electronics market demand, and the sufficient capacity utilization of silicon epitaxial wafers is mainly due to the stable demand for power semiconductors. The revenue of ② and semiconductor power devices was 538 million yuan, down 10.69% from the same period last year. The revenue of 23Q2 was 280 million yuan in a single quarter, an increase of 8.37% over the previous quarter. The company's semiconductor power device chip sales orders are full, and the high capacity utilization rate is mainly due to the stable demand for clean energy and new energy vehicles. ③, compound semiconductor RF chip business, benefiting from product technology breakthroughs, RF chip verification progress has basically covered the domestic mainstream mobile phone chip design customers, in-hand orders increased significantly compared with the same period last year. 23H1 realized an income of 42.6565 million yuan, a net profit of-21.4389 million yuan and a reduced loss.

Profit forecast and investment advice. We estimate that the company's 2023E-2025E revenue will be 2.803 billion yuan, 3.518 billion yuan and 4.806 billion yuan respectively, and the net profit will be 392 million yuan, 567 million yuan and 826 million yuan respectively. Using the segment valuation method, combined with the comparable company valuation, we think that the reasonable market capitalization range of Lionwei is 18.829 billion yuan ~ 21.367 billion yuan, corresponding to the reasonable value range of 27.82 yuan / share ~ 31.57 yuan / share, which is given a "neutral" rating for the first time.

Risk tips: semiconductor industry boom recovery is not as expected, downstream customer inventory removal is slower than expected, new product research and development is less than expected, market expansion is not as expected, market competition is intensified, and so on.