Core views
Net profit from the company's quarterly report increased slightly month-on-month. Among them, revenue from the interconnect chip business reached a record high. Although it was a low season, the performance was impressive. At the same time, new products such as PCIe retimer and MRCD/MDB have begun to scale up and increase performance. We believe that demand in the current general server market continues to recover, and demand for DDR4 and DDR5 memory interfaces is being repaired. Looking ahead to 2024, the penetration rate of DDR5 in servers and PCs will continue to increase, and the company's share of DDR5 and AI-related products will continue to increase, and it is expected to achieve high performance growth throughout the year.
occurrences
The company released the 2024 quarterly report forecast. In 24Q1, it achieved revenue of 737 million yuan, a year-on-year increase of 76% and a decrease of 3%; net profit to mother of 210 to 240 million yuan, up 9.65-11.17 times year-on-year, and -3% to 11% month-on-month; deducted non-net profit of 210 to 235 million yuan, an increase of 708.62 to 793.10 times year-on-year.
Brief review
The general-purpose server market recovered, and the 24Q1 performance was outstanding. Q1 achieved revenue of 737 million yuan, a year-on-year increase of 76%, a decrease of 3% month-on-month, and a median net profit of 225 million yuan to mother, an increase of 4% over the previous month. By product line, Q1 interconnect chip revenue was 695 million yuan, up 68% year on year, up 0.3% month on month, setting a record high of revenue; revenue from the Jinjiao server platform was 39 million yuan, up 497% year on year, down 41% month on month. Q1 General-purpose servers maintained a recovery trend, DDR5 RCD/DB continued to penetrate, DDR4 RCD/DB clients were replenished, and large-scale shipments of new products such as PCIe retimers and MRCD/DB began.
The DDR5 memory interface maintains its iterative advantage, and new products such as PCIe retimer and MRCD/DB are being released. View by product:
1) DDR5 RCD: In October 2023, trial production of the third generation of the DDR5 RCD began, and in January 2024, the fourth generation of the DDR5 RCD was launched, maintaining the global lead.
Furthermore, CKD for PC CUDIMM and CSODIMM announced trial production on April 10. Large-scale procurement began in Q2, and is expected to be applied to AI PCs in the second half of the year, contributing to performance.
2) MRCD and MDB: Benefiting from the demand for higher bandwidth memory modules driven by AI and high-performance computing, server high-bandwidth memory modules using the company's MRCD and MDB chips have begun large-scale trials at mainstream cloud computing/Internet vendors at home and abroad. 24Q1's MRCD/MDB sales in a single quarter exceeded 20 million yuan for the first time.
3) PCIe retimer: Successfully introduced AI server procurement projects from mainstream cloud computing/Internet vendors at home and abroad, and large-scale shipments have begun. 24Q1 shipped about 150,000 PCIe Retimer chips in a single quarter, more than 1.5 times the total shipment volume of the product in 2023.
4) CXL MXC: Since the world's first MXC chip was launched in May 2022, the company has cooperated with many cloud computing vendors and memory leaders. In May 2023, Samsung Electronics launched its first 128GB DRAM supporting CXL 2.0, using the company's MXC chip. As the CXL ecosystem matures and improves, the CXL MXC is expected to start growing in scale in 2025.
Profit forecast and valuation: The company's growth momentum from 2024 to 2025 comes from: 1) the increase in the share of DDR5 products; 2) the increase in the scale of PCIe retimers and new products such as MRCD and MDB. The estimated revenue for 2024-2025 is 4.180 billion yuan, 6.379 billion yuan, and net profit to mother of 1,415 billion yuan and 2,408 billion yuan. The PE corresponding to the current market value is 38x and 22x.
Risk analysis
1. DDR5 penetration falls short of expectations. Currently, the server and PC industry is in the inventory replenishment stage. DDR5 still has a premium compared to DDR4, and customer procurement intentions are uncertain. If inventory replacement falls short of expectations and demand falls short of expectations, then DDR5 penetration rate falls short of expectations, which will affect the company's related product shipments; 2. New product development falls short of expectations. The company is promoting the development of mass-produced versions of products such as DDR5 fourth-generation RCD, DDR5 second-generation MRCD/MDB, and first-generation MXC. There are many new product developments, and technical barriers are high, so there is a risk that R&D will fall short of expectations. 3. Geopolitical risks. The company's main direct customers are DRAM module manufacturers, and its indirect customers and partners are server manufacturers and CPU manufacturers. Most of the manufacturers are overseas companies, including US companies. If geopolitical friction intensifies, it will increase supply chain risks.