occurrences

The company announced the latest Chuangxin micro-trading plan. The transaction plan includes issuing convertible corporate bonds and paying cash to purchase assets and issuing shares to raise supporting capital: to issue convertible corporate bonds to 19 counterparties and to pay cash to acquire 100.00% of Chuangxin Micro's shares; and to raise supporting capital by issuing shares to no more than 35 specific targets.

Key points of investment

It is proposed to issue convertible bonds and pay cash to acquire Chuangxinmicro. Performance promises demonstrate confidence in development.

The company plans to purchase 100% of the shares of Shenzhen Chuangxin Microelectronics Co., Ltd. by issuing convertible bonds and paying cash. The performance promises that Zhongchuangxin's net profit for 2024, 2025 and 2026 (net profit to mother net profit excluding the impact of share payment expenses involved in implementing equity incentives) will not be less than 220 million yuan.

With its own capital to buy back the shares, the company has a long-term competitive advantage. The company released a performance forecast. In 2023, it is expected to achieve operating income of 1.08 billion yuan to 1,095 billion yuan, a year-on-year decrease of 39.44% to 38.60%, net profit to the mother of -0.36 to -0.3 billion yuan, net profit to mother excluding share payments, of 50,000 yuan to 600,000 yuan, and the annual gross margin is expected to be around 52%; in a single quarter, the revenue for 23Q4 is expected to be 267-282 million yuan, an increase of 33-40% over the previous year. In addition, the company plans to use its own capital of 100 million to 200 million yuan to buy back the company's shares through centralized bidding transactions within 6 months. The shares repurchased will be used in future equity incentive plans or employee stock ownership plans, or to convert corporate bonds that can be converted into shares issued by listed companies. The repurchase plan highlights the company's confidence in future business development prospects.

Investment advice:

We expect the company's 2023-2025 net profit to be -0.3/1.8/350 million yuan, maintaining a “buy” rating.

Risk warning:

R&D progress falls short of expectations; risk of increased market competition; semiconductor cycle decline; demand falls short of expectations.