The inventor of the flash drive has been deeply involved in the storage field for more than 20 years. The company focuses on R&D, production and sales of storage products, and is committed to providing solutions for global storage applications. It has achieved diversification and orderly expansion through core technology and independent innovation capabilities. Currently, its products cover the fields of solid-state storage, DRAM dynamic storage, embedded storage and mobile storage. Affected by the storage cycle, the company's short-term performance was under pressure. 23H1 achieved revenue of 705 million yuan, a year-on-year decrease of 11.17%; 23H1 achieved net profit to mother of -20 million yuan, a year-on-year decrease of 189.63%.

Entering a new era of state-owned holdings, the business reach extended to the computing power industry in Shaoguan. In May 2022, Shaoguan City Investment auctioned for 24.89% of Lanco Technology's shares, becoming the largest shareholder of Lanco Technology. On December 4, 2023, Mr. Lui Chi-wing was the chairman of the company's board of directors and the convener of the Strategy Committee. Since then, the company has officially entered a new era of state-owned holdings. Under the overall situation of east and west computing, Shaoguan City is actively developing the big data industry layout. With Shaoguan's state-owned investment in Lanco Technology, with the help of Shaoguan City Investment, Lanco Technology quickly extended its business reach into the computing power industry in Shaoguan City.

The storage industry cycle bottomed out and rebounded, and category expansion brought growth impetus. Currently, most storage leaders such as Samsung and Hynix have announced future production and capital expenditure cuts. As leading manufacturers cut production, the industry's supply and demand structure is expected to be optimized, driving the price of storage products to bottom up and rebound, leading to a reversal in the industry cycle. At the same time, according to global storage semiconductor technology trends, the company actively lays out, accelerates R&D and iterative upgrades of storage products for new processes and solutions, and actively develops products that meet market needs. In addition, the company lays out upstream storage packaging and test plants and downstream AI intelligent computing fields to expand new business development space.

Seize the development opportunities of the computing power industry in Shaoguan and build an ecosystem for the entire computing power industry chain. Shaoguan is listed as one of the eight largest computing power hubs in the country. It is planned to build 500,000 standard racks and 5 million servers by 2025, with an investment of over 50 billion yuan (excluding servers and software). As of December 2, 2023, thanks to the Guangdong-Hong Kong-Macao Greater Bay Area, Shaoguan has signed a total of 59 projects in the entire computing power industry chain, with a total investment scale of over 200 billion yuan, including leading enterprise projects in the industry such as Huawei, the four major operators, Tianyi Cloud, World Data, and Lanco Technology. As the president of the Shaoguan Computing Power Industry Association, Lanco Technology has taken on an important role in the “Spatio-temporal Big Data” project, laying out the computing power field in all aspects, and opening up the entire upstream, middle and downstream industry chains.

Profit forecast and investment advice: We believe that the company will benefit from the recovery of the storage industry cycle and the layout of the computing power industry chain, and performance is expected to gradually improve. The company is expected to achieve revenue of 17.10/22.64 billion yuan from 2023 to 2025, and net profit to mother of 0.38/0.58 billion yuan, corresponding to 3.7 4/2.82/2.20 times the PS valuation on January 5. First coverage, giving a “buy” rating.

Risk warning: the risk of fluctuations in raw material prices; the risk of not being able to continue technological innovation or product updates; the risk of uncertain leasing of Lanco Building; and the risk of RMB exchange rate fluctuations.