Incident: The company released its report for the first quarter of 2024. In 24Q1, it achieved operating income of 247 million yuan, +72.49% year over month, and realized net profit of 51 million yuan, up 138.05% year on year. After deducting non-net profit, it was 66 million yuan, an increase of 293.40% year on year. The 24Q1 consolidated gross margin was 54.62%, +7.11pct year-on-year.

The company's SPD business is expected to resume high growth in 2024. As the inventory level of downstream memory module manufacturers gradually improved, in 23Q4, especially since December 2023, the company's SPD product sales and revenue achieved a significant month-on-month increase. The recovery trend is obvious. 24Q1's SPD product sales increased significantly year-on-year.

The industry expects the penetration rate of DDR5 memory modules to exceed 50% in mid-2024, and will continue to increase in 25 years. The continued penetration of DDR5 will help the company's SPD product sales revenue to continue to grow.

Automotive EEPROM is actively expanding the market. The company now has a full range of automotive-grade EEPROM products of grade A1 and below. The products are widely used in dozens of sub-modules of four major systems, including smart cockpits, three-electric systems, visual perception, chassis transmission and micromotors. The end customers cover mainstream automobile manufacturers at home and abroad. As a leading domestic automotive EEPROM supplier, the company is also actively expanding into key overseas markets. With good brand recognition, high-quality customer resources and excellent product development capabilities, the company's automotive EEPROM product layout is continuously improved, and its market share is expected to continue to increase.

NOR Flash products have been shipped in large quantities in the 512 Kb to 32 Mb capacity range, and the 64Mb to 128Mb products have been successfully distributed in batches to application markets and customer groups such as TWS Bluetooth headsets, PLC components, and AMOLED mobile phone screens. 24Q1 Flash NOR products have shipped more than 56 million units, accounting for nearly 70% of sales in a single quarter. Some specifications of the company's OIS voice coil motor driver chip products have been tested and verified by industry-leading smartphone manufacturers.

Profit forecast: The company's 24-26 revenue is estimated to be RMB 1,138, 14.20, and RMB 1,665 million, respectively, and net profit to mother of RMB 3.50, 4.93, and 628 million yuan, maintaining a “buy” rating.

Risk warning: product development risks; increased industry competition; risk of DDR5 penetration falling short of expectations