Event

The company released its third quarter report in 2023. In the first three quarters of 2023, the company achieved operating income of 433 million yuan, an increase of 26.33% over the same period last year, and a net profit of-49 million yuan, down 78.11% from the same period last year.

The acquisition of new technology shares, cut into the new field of storage. In August 2023, the company injected 370 million yuan into Shanghai Hao Yuangu to invest in new technology equity. After the completion of this transaction, Shanghai Hao Yuangu will hold a 31.39% stake in Xinshun Technology. The company serves as the executive partner of Shanghai Haoyuangu and brings it into the scope of the consolidated statement; however, it does not have control over the new technology and does not include it in the consolidated statement. The new storage technology is hatched by the relevant scientific and technological achievements of the three-dimensional new memory project of the Yangtze River Advanced Storage Industry Innovation Center (hereinafter referred to as the "Innovation Center"). It is planned to operate the new three-dimensional memory business independently.

The new storage application scenarios are extensive, and the new storage technology accelerates the industrialization. 3D PCM is a new generation of storage technology, which has the characteristics of non-volatile, byte addressable and so on.

Compared with DRAM, PCM has the advantages of non-volatile and high storage density; compared with NAND Flash, PCM has the advantage of fast reading and writing, and can be used in data center, enterprise, storage and other fields. In December 2022, the Innovation Center successfully developed China's first three-dimensional new memory prototype chip, and the relevant samples have been sent to potential customers for functional verification. The chip is currently in the development stage of a new three-dimensional memory product chip. It is planned to complete the product chip development in the fourth quarter of 2024. At present, Xinshun Science and Technology has signed a confirmation of cooperation with the government of Anji County, Huzhou City, Zhejiang Province, and will adopt the model of local government + social capital, with a total investment of nearly 10 billion yuan to establish a storage production line.

Investment suggestion: new storage technology breaks the bottleneck of existing storage architecture, is expected to greatly improve the overall performance of storage, and has a broad application prospect. It is recommended to pay attention to the industrialization process of new storage technology 3D PCM. We expect the company's EPS from 2023 to 2025 to be 0.86,1.66 and 2.50 yuan respectively, maintaining a "buy" rating.

Risk tips: the progress of the new storage industrialization is not as expected, the downstream demand is not as expected, the risk of the loss of core technical personnel, and the intensification of industry competition.