Description of the event
On April 9, 2024, Lanqi Technology announced the “2023 Annual Report”. In 2023, the company achieved operating income of 2,286 million yuan, -37.76% year on year; net profit to mother of 451 million yuan, -65.30% year on year; 2023Q4 achieved operating income of 761 million yuan, -3.90% year on year, +27.28% month on month; net profit to mother of 217 million yuan, -27.72% year on year, +42.96% month on month.
Incident comments
The DDR5 penetration rate continues to increase, and the company's performance has improved significantly from quarter to quarter. In 2023, the company achieved operating revenue of 2,286 billion yuan, or -67.76%; net profit to mother was 451 million yuan, -65.30% year over year; the full year of 2023 was affected by falling demand in the server and computer industry and customer warehouses. Shipments of the company's DDR4 memory interface chips and Jinjue CPUs decreased significantly compared to the same period last year, putting pressure on the annual results. By product, in 2023, the company's interconnect chips achieved revenue of 2.85 billion yuan, a gross profit margin of 61.36%, and a gross profit margin of 61.36%; the Jinjue server platform achieved revenue of 94 million yuan, -90.01% year on year, gross profit margin of 4.01%, and 6.53pct year on year; the company's comprehensive gross margin was 59.00%, +12.57 pct year on year. The share of high gross margin interconnect chips increased significantly. On a quarterly basis, thanks to the continuous increase in DDR5 penetration rate, the company's DDR5 memory interface and supporting chips ushered in a sharp rise in volume and price, and performance improved significantly from quarter to quarter; 2023Q4 achieved operating revenue of 761 million yuan, -3.90%, and +27.28% month-on-month; net profit to mother was 217 million yuan, -27.72% year-on-year, and +42.96% month-on-month.
Continue to strengthen R&D, and build core competitiveness with multiple product line layouts. In 2023, the company's R&D expenses were 682 million yuan, +21.00% over the same period; capacity chips and computing power chips are integrated to expand the product category to build a core competitive advantage. In terms of capacity chips, during the reporting period, the company successfully mass-produced PCIe 5.0/CXL 2.0 Retimer chips, pioneered trial production of DDR5 third-generation RCD chips, completed the development of mass production versions of DDR5 first-generation MRCD/MDB chips, DDR5 first-generation CKD chips, and first-generation MXC chips, completed the flow of clock generator engineering samples, and carried out engineering research and development of DDR5 fourth-generation RCDs, second-generation MRCD/MDB chips, and second-generation MXC chips Development and verification of key IPs for PCIe 6.0 Retimer chips. In terms of computing power chips, the company released the fourth generation Impossible? CPU and the 5th generation are affected? At the same time as the CPU, testing and verification work on first-generation AI chip engineering samples was carried out, business adaptation was carried out on relevant application platforms, and samples were sent to potential customers and feedback collected one after another.
DDR5 accelerates penetration and demand is picking up, and the company is expected to continue to deliver results. As a leading international data processing and interconnect chip design company, Lanqi Technology's product strength builds the company's core competitiveness. Demand is picking up+DDR5 is rapidly penetrating, and the company's memory interfaces and supporting chips are expected to continue to increase; at the same time, with the continuous promotion of the company's CXL, PCIe, and Jinjue server products on the client side, the company is expected to usher in continued growth in performance.
The company's net profit for 2024-2026 is estimated to be 1,369 billion yuan, 23.27, and 2,763 billion yuan, respectively, and the corresponding EPS is 1.20, 2.04, and 2.42 yuan respectively, maintaining a “buy” rating.
Risk warning
1. DDR5 penetration falls short of the expected risk;
2. Risk of business fluctuations on the server platform.