Revenue increased quarterly in 2023, and 1Q24 revenue increased 76% year over year. Due to the decline in global demand for servers and computers, the company achieved revenue of 2,286 billion yuan (YoY -37.76%), net profit of 451 million yuan (YoY -65.30%), and net profit of 370 million yuan (YoY -58.11%) in 2023; due to the increase in the share of DDR5 related products, the company's gross margin increased by 12.5 pct to 58.91%.
Among them, 4Q23 had revenue of 761 million yuan (YoY -4%, QoQ +27%), net profit to mother of 217 million yuan (YoY -28%, QoQ +43%), and gross margin of 57.44% (YoY +1.0pct, QoQ -7.4pct). According to the performance forecast, 1Q24's revenue was 737 million yuan, up 76% year on year; net profit to mother was 210 to 240 million yuan, up 9.65-11.17 times year on year.
DDR5 penetration increased, and the company took the lead in starting sub-generation iteration. By business, the company's interconnect chip revenue in 2023 was 2.85 billion yuan (YoY -20.11%), accounting for 96%, and gross margin increased 2.6 pcts to 61.36%; Server platform revenue was 94 million yuan (YoY -90%), accounting for 4%, and gross margin dropped 6.5 pct to 4.01%. As mainstream server CPU platforms supporting DDR5 are launched one after another, the DDR5 downstream penetration rate has increased markedly, driving the company's DDR5 related product shipments to grow steadily since 2Q23. It is expected that the DDR5 penetration rate will exceed 50% in 2024. In order to maintain its leading position, the company pioneered the DDR5 sub-generation iteration, took the lead in trial production of DDR5 third-generation RCD chips in October 2023, and launched DDR5 fourth-generation RCD chips supporting 7200MT/s data rates in January 2024.
A variety of high-performance “capacity” chips have been launched to seize AI opportunities, and large-scale shipments of some products have already begun.
Focusing on “capacity” requirements, the company has laid out a series of high-speed interconnect chip solutions, including PCIereTimer, MRCD/MDB, CKD, MXC, etc., and large-scale shipments of some new products have already begun.
Among them, PCIe 5.0 Retimer chips have been successfully introduced into AI server procurement projects of some mainstream cloud computing/Internet vendors at home and abroad, and large-scale shipments have begun, with 1Q24 shipments of about 150,000 units, more than 1.5 times that of the product in 2023; high-bandwidth memory modules for servers equipped with the company's MRCD/MDB chips have begun large-scale trials at mainstream cloud computing/Internet vendors at home and abroad, and 1Q24's MRCD/MDB chip revenue has exceeded 20 million yuan for the first time.
Investment advice: Downstream demand resumed combined with large-scale shipments of new products to maintain the “buy” rating company 1Q24's revenue of 737 million yuan (YoY +75.74%). Considering that the server and computer industry restock after inventory was completed, and that some of the company's new products began large-scale shipments, we expect the company's net profit from 2024-2026 to 11.83/17.89/2,444 billion yuan, corresponding to the stock price on April 19, 2024. The company's downstream demand gradually resumed the volume of superimposed new products and maintained a “buy” rating.
Risk warning: New product development falls short of expectations; customer verification falls short of expectations; demand falls short of expectations.