The problem of connecting industry demand and production capacity has brought short-term performance pain, waiting for industrial recovery and the commissioning of independent production capacity. In the first three quarters, the company achieved operating income of 283 million yuan, a year-on-year decline of 21.79%, net profit of 17.7738 million yuan, a year-on-year decrease of 67.28%, and net profit of 14.6583 million yuan after deducting non-attributable net profit of 146.583 million yuan, a year-on-year decrease of 68.75%. Both Guangxin Micro and Microchip Microtech, which are responsible for power semiconductor wafer manufacturing, are in the construction stage and have yet to generate revenue. Moreover, due to the continuous deepening of the Smart IDM layout, the holding subsidiary Guangwei 6-inch wafer foundry has moved out, and the pace of release of their own production capacity has not been perfectly connected, resulting in a short-term imbalance between product structure, foundry and commercial channels, and the sale of MFER is mainly inventory sales. Due to the weakness of the new energy vehicle and photovoltaic markets, the power device market is in a slump stage, and the performance of domestic “relatively mature” power suppliers is declining. It is quite common for people in the same industry to compete with each other in the market. Not to mention custom-made products, which are mainly operated by Guangzhou and micro, have high gross profit, so it is inevitable that they will be impacted. Overall, this year is a painful period for the company's power semiconductor layout, but it is only a reflection of the company's level of understanding and execution of the industry by making thousands of steps and shortening the painful period as much as possible.

Go as far as it is difficult and wait for the synergy of the “Smart IDM” layout to unfold. The construction of a foundry and a reduced production line is not an easy task. Minde's simultaneous development through Guangxin Microtech and Microchip Microtech, and both have handed over impressive construction speed, which is an excellent demonstration of its execution power: the 6-inch silicon-based foundry project only took 145 days from construction to commissioning. The basic framework of “silicon wafer - wafer manufacturing - ultra-thin path - design” has been established, and all subsequent steps will be at each other's corner, watching and helping each other. For example, Guangxin Micro can provide production capacity guarantee, and Guangwei can help Guangxin Micro maintain a normal level of operating rate, and Microchip can strengthen Guangxin's foundry capabilities in the IGBT and SiC fields on a targeted basis. This kind of upstream and downstream resonance and synergy effects will gradually be demonstrated as the production capacity of Guangxin Micro and Microtech gradually climbs.

The bar code recognition business continues to act as a ballast stone and cash cow. The barcode business revenue for the first three quarters of 2023 increased 16.17% year over year, which is the main contributor to profit and operating cash flow. The company continues to strengthen the bar code reading business layout, expand the business moat, and protect the company's layout and future growth in the field of power semiconductors.

Investment suggestions: The company is expected to achieve net profit of 0.41, 1.47 and 290 million yuan from 2023-2025. The current market value corresponding to PE is 106.1, 29.4 and 15.0 times, respectively, maintaining the buying rating.

Risk warning: (1) orders from overseas customers for bar code reading equipment fell short of expectations; (2) the construction progress of the Guangxin Microelectronics project fell short of expectations, and the synergy effect was lagging behind; (3) the risk of impairment of goodwill.