Key points of investment:

Established in 1999, Jiang Bolong is dedicated to the development and marketing services of Flash and DRAM storage products. It has formed four major product lines: embedded storage, solid state drive (SSD), mobile storage and memory sticks, providing consumer, industrial grade, automotive grade memory, and industrial storage software and hardware application solutions.

Jiang Bolong has two major storage brands, industry-class storage FORESEE and international high-end consumer Lexar, leading the market share of many storage products. According to Omdia data, in 2021, Lexar memory cards ranked second in the global market share, and Lexar flash drives (USB drives) ranked third in the global market share. According to TrendForce's 2021 ranking of global SSD module companies' private brand channel market shipments, the Lexar brand ranked fourth in the world in terms of shipment volume in this market. According to the CFM flash memory market, the company ranked 6th in the world for eMMC & UFS market share in 2022.

In 2018-2021, embedded storage became Jiang Bolong's main growth product. In 2022, Jiang Bolong's embedded storage accounted for 52.4% of revenue, solid-state drives accounted for 18.1% of revenue, mobile storage accounted for 24.5%, memory stick products accounted for 5.0% of revenue, and other products accounted for 0.1%. After recovering from the storage cycle since 2023Q3, revenue reached record highs for two consecutive quarters. Jiang Bolong's revenue exceeded 10 billion yuan for the first time in 2023.

All four types of storage products have expanded from consumer-level to enterprise-grade and automotive-grade storage. Explosive data growth has created huge demand space for enterprise-grade storage. Automobiles are becoming more intelligent, bringing opportunities for automotive-grade storage. According to Gartner, the global ADAS sector's NAND Flash storage consumption is expected to reach 4.15 billion GB by 2024. Jiang Bolong's more powerful automotive-grade UFS will replace eMMC and become a forward-looking choice for car manufacturers.

Accelerate self-developed SLC/MLC NAND Flash and master control chips to build a core barrier. Shipments of SLC NAND chips exceeded 10 million units in 2023, and the first self-developed 32Gb MLC NAND chip was released in 2024. In 2023, Jiang Bolong began mass production of the main control product LS600/LS500, which supports high-end eMMC and memory cards.

Accelerate the vertical integration of test equipment and packaging production capacity. In terms of business model, Jiang Bolong mainly focuses on R&D, design and brand operation of semiconductor storage application products, including firmware algorithm development, system-level integrated package design (SiP), memory chip test algorithms, and storage application technology development. Storage wafers account for nearly 80% of Jiang Bolong's operating costs. Fluctuations in wafer prices are the main cause of cost changes, followed by packaging, testing, processing, and main control chip costs. In 2023, Jiang Bolong used Yuancheng Suzhou, Zhiyi Brazil (Zilia), and Zhongshan Phase II to build self-sufficient manufacturing capabilities.

First coverage, giving a “buy” rating. The revenue forecast for 2023-2025 is $103/132/17.2 billion, and the net profit forecast to mother is -8.44/1,464 million yuan. Refer to the average PS value of comparable companies in 2024, and Jiang Bolong's 2024 PS 3.0X, which corresponds to a 45% increase in target market value, giving it a “buy” rating.

Risk warning: 1) risk of supplier concentration; 2) risk of wafer and product price fluctuations; 3) risk of technology iteration