Introduction to this report:

The release of new machines compounded the switching cycle. Demand increased month-on-month, and Q3 performance turned a loss into a profit. New products such as the Huawei Nova 12 series will soon be released, and the company's high-end CIS product business is expected to benefit.

Key points of investment:

Maintain the “increase in holdings” rating and maintain the target price at 68.20 yuan. The Q3 performance recovered, but the overall recovery fell short of expectations, maintaining the 23-25 EPS at 0.09/0.62/1.29. The company's two high-end 50M pixel CIS products have industry-leading performance and are expected to benefit from the future release of new Huawei products. Consider that the average valuation of companies with comparable semiconductor designs is 72 times PE, giving them 110 times PE in 2024 and maintaining the target price of 68.20 yuan.

The release of new machines compounded the switching cycle. Demand increased month-on-month, and Q3 performance turned a loss into a profit. In the first three quarters of 2023, the company achieved revenue of 1,773 million yuan, YOY +7.16%; net profit loss of 65 million yuan; gross profit margin of 18.31%, YOY-7.76PCTS. 3Q23 The company achieved revenue of 700 million yuan, YOY +8.58%, and QoQ +13.22%; realized net profit of 864,300 yuan, turning a loss into a profit.

New products such as the Huawei Nova 12 series will soon be released, and it is expected to be equipped with a 50M pixel main camera. The company's two high-end CIS products, SC550XS and SC520XS, have been successfully mass-produced and shipped, and are expected to benefit. The new Huawei Nova 12 series is expected to be released by the end of '23, and is expected to be equipped with a 50M pixel main camera. The performance of the company's two high-end CIS products, SC550XS and SC520XS, can meet the needs of flagship smartphone main camera and front camera, ultra-wide-angle, and telephoto cameras, respectively. They have performance advantages such as ultra-low power consumption, full-color night vision imaging, and high dynamic range, and are expected to enter its industry chain and expand.

Catalysts: Q4 demand is gradually picking up; high-end CIS products are released at an accelerated pace.

Risk warning: Technology development falls short of expectations; market competition intensifies.