Shannon Xinchuang released its 2023 annual report and 2024 quarterly report: In 2023, the company achieved revenue of 11.268 billion yuan, a year-on-year decrease of 18.19%; net profit to mother was 388 million yuan, an increase of 20.29% over the previous year. In the first quarter of 2024, the company achieved revenue of 2,03 billion yuan, a year-on-year increase of 46.86%; realized net profit of 0.14 million yuan, a year-on-year decrease of 83.49%; and realized net profit of 54 million yuan after deduction, an increase of 193.45% over the previous year.

Key points of investment

Storage industry boom picks up, 2024Q1 revenue grows

Since 2024, the recovery in demand for terminal applications such as mobile phones, PCs, and servers has led to a rise in memory demand, and memory prices have rebounded. The company achieved revenue of 2.03 billion yuan in the first quarter of 2024, an increase of 46.86% over the previous year. On the profit side, the fair value of the shares held by the company and its subsidiaries decreased, resulting in a year-on-year decrease of 83.49% in net profit due to the year-on-year increase of 193.45% after deduction. Furthermore, due to the sales structure, gross margin for the first quarter of 2024 fell 0.84pct year on year to 5.29%.

New storage module product research and development, “distribution+product” to create a new growth curve

In 2023, the company established Shenzhen Haipu and Wuxi Haipu to lay out research and development of eSD and DRAM modules respectively, forming a “distribution+product” integrated development pattern. The company has been deeply involved in the field of high-end storage for many years. Based on the original distribution business, it has a high starting point for raw materials supply and customer introduction, and has significant advantages in entering eSD and DRAM module research and development. At present, Shenzhen Haipu has launched products and achieved small sales in 23 years; the company's first-generation memory product, DDR4 RDIMM memory cards, have entered the testing stage, and DDR5 RDIMM memory cards are also in the planning stage.

Shareholding structure optimization, equity incentives show determination to transform

The controlling shareholder of the company carried out 3 contract transfers in the first quarter of 2024, and the shareholding structure was optimized. Mr. Huang Zewei, the director and co-chairman of the company, directly and indirectly holds more than 10% of the shares. The increase in shareholding shows the management team's confidence in the company, enhances the management team's voice, and helps the management team maintain stability. At the same time, the company launched a 2024 restricted stock incentive plan, with revenue targets for the semiconductor product sector of 200 million yuan, 400 million yuan, and 800 million yuan respectively, fully demonstrating the company's determination to transform into a product company.

Profit forecasting

The company's revenue for 2024-2026 is estimated to be 155.56, 17.822, and 20.321 billion yuan, respectively, EPS 0.85, 1.01, and 1.15 yuan, respectively. The PE corresponding to the current stock price is 43, 37, and 32 times, respectively, maintaining the “gain” rating.

Risk warning

Risk of supplier dependency, risk of high customer concentration, risk of price fluctuation of IC products such as memory, risk of downstream demand recovery falling short of expectations, etc.