Core views:

The company released its 2024 quarterly report, with 24Q1 revenue of 247 million yuan, YoY +72.49%, a record high in Q1; net profit to mother of 51 million yuan, YoY +138.05%; net profit after deducting non-attributable net profit of 66 million yuan, YoY +293.40%; Huahong shares held by the company confirmed fair value change profit and loss of -0.2 billion yuan in 24Q1, net profit of 0.71 million yuan, YoY +232.08%. As demand in the downstream application market gradually picked up, the overall sales situation of the company's major products showed a good growth trend. 24Q1 achieved a gross profit margin of 54.62%, +7.11pct year over year. Benefiting from the increase in the sales share of the company's SPD products and products used in high-value-added markets such as automotive electronics and industrial controls, the company's profitability has been greatly enhanced.

Looking at 24Q1 by product, (1) SPD: sales of the company's SPD products increased significantly year-on-year as the inventory level of downstream memory module manufacturers improved and the penetration rate of DDR5 memory modules continued to increase; (2) industrial-grade EEPROM products and voice coil motor driver chip products: benefiting from successful iterations of the product line, product shipments grew rapidly; (3) NorFlash: NOR Flash products developed by the company based on the NORD process platform, including NOR with a capacity of 512Kb-32Mb Flash products have been shipped in large quantities, and 64Mb to 128Mb NOR Flash products have successfully completed streaming. 24Q1 has shipped more than 56 million NOR Flash products, accounting for about 70% of sales in a single quarter, and market share and brand influence are constantly increasing; (4) Automotive-grade EEPROM: The company is actively expanding key overseas markets such as Europe, South Korea, and Japan, with mainstream domestic and foreign automobile manufacturers and many industry-leading automotive electronics Tier1 suppliers Close cooperation has further strengthened the brand recognition and market competitiveness of automotive-grade EEPROM products, and product shipments have achieved rapid year-on-year growth.

Profit forecasting and investment advice. The company's EPS is expected to be 2.79, 4.21, and 5.37 yuan/share in 24-26, respectively. Referring to comparable company valuations and the company's business growth, we maintain the judgment that the company's reasonable value is 84.03 yuan/share, corresponding to the 24-year 30x PE valuation.

Risk warning. DDR5 penetration fell short of expectations; downstream demand fell short of expectations; new product progress fell short of expectations.