Conclusions and recommendations:
1H24's revenue increased by more than 20%, net profit after deduction increased by 40%, and performance improved markedly. The storage industry is expected to improve quarterly in 2024, and the performance flexibility of leading companies will continue to show.
As a leader in the domestic storage field, GigaYi Innovation has now become a platform enterprise for storage+MCU+ sensors. It is expected that it will continue to benefit from domestic import substitution and the increase in semiconductor demand in the long term. The current stock price is 23 times PE in 2026. Currently, the industry is recovering from the bottom of its bottom, giving it a “buy” rating.
Under pressure from the 2023 performance, the company achieved revenue of 5.76 billion yuan, YOY decreased by 29.1%; realized net profit of 160 million yuan, YOY decreased by 92.1%, and EPS 0.24 yuan. Among them, in the fourth quarter, the company achieved revenue of 1.37 billion yuan, YOY increased by 0.4%, and losses of 273 million yuan, an increase of 230 million yuan over the previous year. The reason why the company's performance in 2023 is under pressure: on the one hand, due to the slump in the industry, the price and sales volume of the company's storage products are under pressure. On the other hand, the company calculated an inventory impairment loss of 49 million yuan in 4Q23 and a loss of 380 million yuan in goodwill impairment losses, which led to the company's large losses during the quarter.
The profit inflection point of 1Q24 showed a clear upward trend: in the first quarter of 2024, the company achieved revenue of 1.63 billion yuan, YOY increased 21.3%; achieved net profit of 200 million yuan, YOY increased 36.5%, net profit after deducting 180 million yuan, YOY increased 41%, and EPS 0.31 yuan. Since 2H22, the Nor Flash industry has continued to decline due to weak demand for consumer electronics such as mobile phones and PCs. After experiencing a continuous decline in the industry for more than a year, with the recent recovery in demand for downstream mobile phones and PCs, the price of storage products stopped falling and rebounded since 4Q23, and generally recorded a quarterly increase of more than 10% in 1Q24. Looking ahead to 2024, niche products such as AI servers, AIPC, and AI phones will further increase demand for storage products. We expect that the storage capacity of PCs and mobile phones equipped with AI functions (large local models) will exceed 16Gb, and the penetration rate of AIPC and AI phones will increase dramatically by 2025, driving a 2-digit increase in storage capacity this year and next two years. The industry's supply and demand structure has been further improved. Leading companies are expected to benefit.
Profit forecast: Judging comprehensively, the industry's inventory removal is gradually coming to an end, and the future boom will improve quarter by quarter.
The company is expected to achieve net profit of 1.18 billion yuan, 1.78 billion yuan and 2.28 billion yuan in 2024-26, up 633%, 51%, and 23% year-on-year, respectively, and EPS of 1.77 yuan, 2.66 yuan and 3.27 yuan respectively. Currently, the stock price corresponds to 42 times, 28 times, and 23 times PE in 2024-2026, respectively. The industry sentiment is recovering at a rock bottom, and the company's performance is flexible, giving it a “buy” rating.
Risk warning: Technological friction between China and the US affects the company's product demand;