Incident: On the evening of January 29, 2024, the company released its 2023 performance forecast. In 2023, the company expects to achieve revenue of 650 million yuan to 750 million yuan, a year-on-year decrease of 37.62% to 28.02%; it is expected to achieve net profit attributable to mother -2.25 to -175 million yuan, and is expected to achieve net profit of -2.56 to -206 million yuan after deducting non-recurring profit and loss.

Due to the downstream industry's inventory clean-up cycle, 23-year performance expectations are under pressure in the short term. Looking at the 23Q4 single quarter, the company expects to achieve revenue of 0.57 billion yuan to 157 million yuan, net profit to mother of -0.87 to -0.37 million yuan, and deduct non-net profit of -0.94 to -44 billion yuan. 23Q4 revenue fell 35.75% to 76.62% year over year and 16.58% to 69.64% month over month. The company's 23-year performance is under pressure, mainly affected by the terminal market demand cycle and the downstream industry inventory clean-up cycle. At the same time, in order to further enrich the company's product sequence and cover more downstream application areas, the company continues to increase investment in product development and team building. R&D expenses have increased significantly, compounded by insufficient demand for terminals and the impact of falling operating income, resulting in the company expected to suffer losses in 23 years.

New products in the Phoenix series continued to grow, and sales of mature products declined under pressure. Looking at the product range, the company's FPGA chip products currently form a product matrix composed of SALPHOENIX's high-performance product family, SALEAGLE high-efficiency product family, and SALELF low-power product family. Affected by sluggish demand for terminals, shipments of the company's mature products have declined, while the market expansion of new Phoenix series products is good, and sales have maintained a certain year-on-year increase. The company's “main battleground” for the downstream sector focuses on industrial control and communications. The company is expected to stabilize and expand its leading edge in the industrial control, network communication, consumer electronics and other markets through years of experience in the FPGA field, and actively explore emerging markets such as automotive electronics, data centers, and computational acceleration.

Continuous investment in R&D and continuous improvement of the product matrix help the company develop in the long term. Guided by market demand, the company is committed to innovative technology and product research and development in the FPGA field. The R&D expenses for the first three quarters of 2023 were 312 million yuan, an increase of 32.51% over the previous year. It carried out research and development of new FPGA/FPSoC chip series products and supporting special EDA software, and improving the product matrix. Continued high R&D investment will protect the company's medium- to long-term development. At present, the company's PHOENIX series has entered the 28nm node, and PH1A400 products have been exhibited at the 2023 Munich Shanghai Electronics Show. As more advanced materials enter more high-end application fields, it is expected to expand new incremental space for the company's performance.

Profit forecast and investment advice: Affected by downstream sentiment, the company's 23-year performance is expected to decline. We adjusted the company's profit forecast. The company is expected to achieve revenue of 7.15/9.43/1,406 billion yuan in 23-25 years, and net profit to mother of 1.95/0.03/0.33 billion yuan. The PS corresponding to the January 30 market value is 16/12/8 times, respectively, maintaining a “buy” rating.

Risk warning: risk of declining performance or loss, risk of increased industry competition, risk of R&D process.