Shengbang Co., Ltd. is a leading domestic analog chip company. It covers two major categories of signal chains and power management, and covers a wide range of downstream consumer electronics, industry, automobiles, and communications. Shengbang Co., Ltd. released its 2023 annual report and 2024 quarterly report. Combined with the announcement information, the comments are as follows:

The company's 24Q1 revenue remained stable month-on-month, and gross margin increased to over 52% month-on-month. The company's 24Q1 revenue was 729 million yuan, +42.03% YoY /-0.75%. The Q1 revenue performance was in line with expectations, mainly due to the recovery of overall industry demand and continued until Q1, with a gross profit margin of 52.49%, -0.18pct/month-on-month +5.27pcts. The increase in gross margin was mainly influenced by factors such as the rise in demand in the consumer products industry such as mobile phones, and the continuous introduction of new customers. Net profit for 24Q1 was 54.38 million yuan, +80.04% /month-on-month -60.8%, net profit margin 7.06%, year-on-year +1.62 pcts/month-on-month -11.14 pcts.

TI, a major international manufacturer, carefully anticipates that customers in the industrial sector are nearing completion, and the competitiveness of local simulators in China will increase dramatically. TI, a major international simulation company, showed a median revenue of US$3.8 billion in 24Q2, -16.13% YoY /+3.80% YoY, and the year-on-year decline began to decline (24Q1 revenue -16.4% YoY). Looking at TI's 24Q1 downstream businesses by sector, only personal electronics products had a single-digit percentage increase year over year; industry fell 25% year over year; automobiles fell by single digits year over year/communication equipment fell 50% year over year. TI said that some customers currently in the industrial market are nearing the end of their inventory consumption cycle, and some projects with shorter cycles have started earlier. The localization rate of analog chips in the Chinese market has reached 12%, and there are many competitive rivals in mainland China.

The company's main downstream demand picked up, and new products+customer expansion in the industrial sector helped highlight its own α.

Looking at product classification, the company's revenue in 2023 was 66.75% and 33.25%, respectively. Among them, power management products accounted for a year-on-year increase of 4.28 pcts. The gross margins of the two types of products were 46.1% and 56.64%, respectively, with a significant year-on-year decline. The company currently has more than 5,200 products to sell in 32 categories. The company is currently experiencing a clear recovery in demand for consumer products. The industrial market has shown superior performance to the industry as a whole due to the launch of new products and strong market expansion, and the share of revenue in the automotive electronics sector is expected to continue to rise this year.

Investment advice. In 2023, domestic analog chip companies were affected by weak downstream demand and intense price competition in the domestic market. Since 23Q3, some consumer sectors have shown signs of bottoming out, but the current industry is mostly structural recovery, and the recovery trend in industrial and other fields still needs to be carefully optimistic. Although the automobile and other markets have huge domestic replacement space, the competitive trend is expected to continue for a long time, and the market is gradually recovering from margins. However, in the long run, we recommend continuing to pay attention to the intensity and sustainability of the recovery. The valuation level of some A-share analog chip companies is still relatively high. Keep watching for high valuations or long-term pressure on stock prices. Based on the company's latest announcements and industry updates, we expect the company's 24-26 revenue to be 31.5/38/4.6 billion yuan, corresponding net profit to mother of 4.04/6.04/788 million yuan, corresponding EPS of 0.86/1.28/1.68 yuan, and corresponding PE of 89.5/59.9/45.9 times, maintaining the “gain” rating.

Risk warning: Domestic substitution falls short of expected risk, risk of demand falling short of expectations, risk of upstream supply chain risk, increased risk of industry competition, macro-environmental risks, etc.