Revenue is expected to increase month-on-month in 4Q23, turning net profit into profit

Jiang Bolong released the 2023 annual results forecast: The company is expected to achieve revenue of 10 to 10.5 billion yuan for the whole year, corresponding to 4Q23 revenue of 3.5 to 40 billion yuan, QoQ +20% or more, YoY +100%, slightly exceeding market expectations; estimated net profit of 8.6 to -80 billion yuan, corresponding to net profit of 0.23 to 83 million yuan in a single quarter of 4Q23, and estimated net profit deducted from mother for the full year of -9.2 to 860 million yuan, corresponding to 4Q23 single quarter deducted non-net profit of -0.37-0.23 million yuan At 100 million yuan, net profit from the mother in a single quarter was established as an inflection point, slightly exceeding market expectations. We believe it was mainly due to the increase in storage prices.

Development trends

At the end of 3Q23, 1) measures such as reducing production by original international storage manufacturers achieved results; 2) the traditional peak season for consumer electronics, end customer inventory replenishment jointly drove the storage industry into an upward cycle, and a trend of price increases for mainstream storage products was established. According to TrendForce estimates, the comprehensive price of 4Q23 DRAM products is QoQ+8~ 13%, NAND Flash QoQ +13~ 18%, and it is expected that 1Q24 DrAMQoQ +15 ~ 20%, NAND Flash QoQ +13 ~ 18%, and the price of each product will continue to rise in every quarter of 2024. We see that the sharp rise in volume and price of mainstream storage products has led to a significant month-on-month increase in Jiangbolong's 4Q23 performance. It is expected that the continued rise in prices in 2024 will continue this trend.

At the end of 3Q23, the company had an inventory of 4.850 billion yuan, of which more than half were storage wafers. We believe this part of the lower-cost storage wafers will further boost the company's profits.

With the active development of overseas sales, the company's Lexar brand memory cards, solid-state drives, memory sticks and other high-end consumer market products grew rapidly in 2023. Enterprise-grade products have been certified by customers such as Lenovo, JD, and Bilibili, and we expect to launch in 2024. The main control chip has now completed streaming, and we believe it is expected to further enhance the competitiveness of the company's modules. In October 2023, Jiang Bolong completed the acquisition of Yuancheng Suzhou (Licheng Suzhou). We believe that having independent packaging production capacity will optimize the company's product costs and accelerate the company's new product development. In December 2023, the company completed SMART Brazil. We believe that with this, the company will directly enter the Brazilian and even Latin American markets, and further accelerate its overseas layout.

Profit forecasting and valuation

The company's revenue forecast range is in line with our expectations, keeping the 2023 revenue forecast of 10.184 billion yuan unchanged; the 2023 net profit was adjusted from -693 million yuan to -803 million yuan due to equity incentive payments and other reasons; considering the company's clear inflection point signal and the further positive trend in storage prices, the 2024 revenue forecast was raised 9.2% to 14.07 billion yuan, and the net profit for 2024 was raised from 276 million yuan to 562 million yuan; introduced a 2025 revenue forecast of 16.808 million yuan, net profit The forecast is $1,173 billion. The current stock price corresponds to 2024/2025 53.1/25.4x P/E. We believe that the company's normalized net profit for 2024 was 1,121 billion yuan (taking 8% as the normal net profit margin), giving a normal net profit of 36.6x P/E in 2024, keeping the target price unchanged at 99.37 yuan, with 37.52% upward room, and maintaining the industry performance rating unchanged.

risks

Price increase/demand falls short of expectations, increased market competition, trade friction, exchange rate risk, merger and acquisition risk.