Incident: The company released its annual report for the year 23 and the quarterly report for '24, with revenue of 5.761 billion yuan, YoY -29.14%; net profit to mother of 161 million yuan, YoY -92.15%; net profit after deducting non-return to mother of 27 million yuan, YoY -98.57%. Looking at 24Q1, revenue of 1,627 million yuan, YoY +21.32%, QoQ +19.10%; net profit to mother of 205 million yuan, YoY +36.45%, QoQ +175.14%; net profit after deducting non-return to mother was 184 million yuan, YoY +41.26%, QoQ +158.68%; gross profit margin 38.16%, YoY+3.62pcts.
Price increases in niche storage combined with the launch of new products such as DDR4 are expected to increase in self-developed DRAM purchases in '24.
According to the company's daily related transaction forecast amount announcement, the rebound in 23Q3 DDR3 mass production and niche storage prices led to an increase in procurement volume starting in 23Q4, reaching 200 million yuan in 24Q1. It is estimated that the increase in DDR3 foundry volume and mass production of new products such as 8Gb DDR4 will drive the annual procurement amount to 852 million yuan in 24, +135% over the same period last year.
In addition to DRAM, shipments of products other than DRAM have also increased dramatically, and the market share continues to stabilize. 1) NorFlash: Shipments reached 2,533 billion units in 23, +16% year-on-year, with cumulative shipments exceeding 212 billion units by the end of 23. According to Web-Feet Research, the company's serial NOR Flash market share rose to second place globally in '23. 2) Automotive-grade flash memory: cumulative shipments exceed 100 million units; 3) SLC NAND Flash: year-on-year increase in shipments in 23 years; 4) MCU: 23Q4 demand stabilized month-on-month, with cumulative shipments exceeding 1.5 billion units by the end of 23. New high-performance automotive MCU products and China's first M7 core ultra-high performance MCU were launched, and the new dual-band dual-mode wireless MCU series products with RISC-V cores were officially mass-produced and delivered.
Storage prices are expected to gradually pick up, and the outlook for equity incentive targets is positive. According to TrendForce data, DRAM and NAND Flash contract prices have increased since 23Q4 and 23Q3 respectively, and demand for AI, edge computing, and autonomous driving is expected to drive the 24-year storage market recovery and improvement in company performance. The company issued a draft equity incentive for 24. The 24-27 revenue assessment targets were approximately 72.9, 86.2, 98.0 billion yuan, and 11.80 billion yuan. Based on 23, the revenue growth rates were not less than 26.6%, 49.6%, 70.1%, and 104.8%, respectively. The high growth target reflects development confidence and determination.
Profit forecast: The company's net profit for 24-26 is estimated to be 11.55 billion, 16.69 billion yuan, and 19.33 billion yuan, respectively. The corresponding PE is 42.8, 29.6, and 25.6 times, respectively, maintaining a “buy” rating.
Risk warning: New products fell short of expectations, the rebound in storage prices fell short of expectations, and downstream demand fell short of expectations.