1Q24's profit increased year-on-year, with PCIe Retimer and other companies with sufficient orders for new products in 1Q24, achieving revenue of 737 million yuan (yoy: +75.74%, qoq: -3.06%), net profit to mother of 223 million yuan (up more than 10 times year over year, qoq: +2.88%), net profit of 220 million yuan (up 741 times year on year, qoq: +2.57%). 1Q24's interconnect chip revenue hit a record high for this product line in the first quarter, mainly benefiting from: 1) the market demand for memory interface chips achieved restorative growth; 2) the company began large-scale shipments of new products such as PCIe Retimer and MRCD/MDB.
As of April 22, 2024, the company expects to have more than 90 million yuan of orders for PCIe Retimer, MRCD/MDB and CKD chips delivered in 2Q24. The DDR5 penetration rate continued to increase in 2024, and the three AI high-performance “capacity” chips showed a good growth trend. We maintained the company's 24/25/26 net profit forecast of 13.53/24.90/36.93 billion yuan. Considering that the company is the leader in the global interface chip market segment, we gave 61.5x 24PE (comparable to the company's consistent expectation of 47x) and a target price of 73.2 yuan, maintaining a “buy” rating.
1Q24 review: Interconnect chip revenue hit a new high in the first quarter, and revenue from new AI-related products grew rapidly. 1Q24's interconnect chips achieved revenue of 695 million yuan (yoy: +68.38%; qoq: +0.29%), and the Jinjiao server platform's revenue was 0.39 million yuan (yoy: +615%; qoq: -36%). As demand for memory interface chips picks up, DDR4 RCD inventory removal has come to an end, and we expect 1Q24DDR4/DDR5 RCD sales to grow sequentially. In addition, PCIe Retimer has been introduced in mainstream cloud factory AI server projects. In 1Q24, about 150,000 units were shipped, and PCIe 5.0 accounted for more than 90%.
Meanwhile, end customers of MRCD/MDB-related products began large-scale trials, with 1Q24 revenue exceeding 20 million yuan. Due to the increase in revenue share of high-margin products such as DDR5 memory interface chips, PCIe Retimer, and MRCD/MDB, 1Q24's gross margin of interconnect chips was +6.98pct to 60.93% year over year, but due to the month-on-month improvement in DDR4 RCD sales, gross margin declined slightly (-1.98pct).
2024 outlook: DDR5 child generation iteration is accelerating, focusing on the launch of new products in 2024, and the DDR5 penetration rate is expected to increase further in 2024, driving the company's annual revenue to maintain a rapid year-on-year growth trend. Specifically: 1) DDR5 child generation iteration is accelerating. The company expects DDR5 second-generation RCD shipments to surpass first-generation products in the first half of 24, and large-scale shipments of the third-generation product 2H24 will begin; 2) PCIe 5.0 Retimer, MRCD/MDB new customers, new customers Projects continue to be introduced and sold one after another. CKD chips were tested in April, and large-scale shipments began in 2Q24; 3) Demand for servers is gradually picking up, and the company expects the amount of Intel-related transactions to be no more than 500 million yuan in 2024, an increase of more than 4 times over the actual amount incurred in 2023.
Investment suggestion: The target price is 73.2 yuan, giving a “buy” rating. We maintain the company's 24/25/26 net profit forecast of 13.53/24.90/36.93 billion yuan. Considering the company as the market leader in the interface chip segment, we give 61.5x 24PE (comparable to the company's consistent expectation of 47x), with a target price of 73.2 yuan to maintain the “buy” rating.
Risk warning: Market demand is declining, market competition is intensifying, and new product progress falls short of expectations.