Juchen Co., Ltd. released the 2023 annual report and the report for the first quarter of 2024: the company achieved operating income of 703 million yuan in 2023, a year-on-year decrease of 28.25%; realized net profit of 100 million yuan, a year-on-year decrease of 71.63%; and realized net profit deducted from non-return to mother of 883.25 million yuan, a year-on-year decrease of 77.52%. In Q1 2024, the company achieved operating income of 247 million yuan, a year-on-year increase of 72.49%; realized net profit of 51.0906 million yuan, an increase of 138.05% over the previous year; realized net profit deducted from non-mother of 66.112 million yuan, an increase of 293.40% over the previous year.

Key points of investment

2023 results are under pressure, and 2024 recovery is beginning to show

In 2023, the company was affected by factors such as global macroeconomic fluctuations, the decline in the boom in the terminal electronics industry, and procurement and inventory strategy adjustments by downstream module manufacturers. Some of the company's businesses were under great pressure, and demand in the PC and server markets was weak, leading to a sharp decline in sales and revenue of the company's SPD products, which became the main factor affecting the decline in the company's performance. In 2023, Q1-Q4 revenue was 143 million yuan, 174 million yuan, 185 million yuan, and 202 million yuan respectively; in 2024, with the gradual recovery of demand in the downstream application market, the overall sales situation of various products showed a good growth trend. In Q1 2024, revenue of 247 million yuan was achieved, an increase of 72.49% over the previous year. In the future, as the share of sales of SPD products and products used in high-value-added markets such as automotive electronics and industrial control increases, the company's profit is expected to increase further.

R&D increased year-on-year, and technology accumulation consolidated competitive advantage

In 2023, the company invested a total of 161 million yuan in R&D, up 19.98% year on year; R&D investment accounted for 22.86% of revenue, an increase of 9.19 percentage points over 2022; the number of R&D personnel also rose from 110 in 2022 to 135. Since its establishment, the company has been focusing on the field of integrated circuit design, and has accumulated strong technology and R&D advantages. The company's R&D experience and technical reserves are comprehensive and cover a wide range, and also has strong storage, digital, analog and digital-analog hybrid technology. In the field of memory chips, product performance has been improved through self-developed energy-efficient charge pump design technology and online error correction technology; in the field of voice coil motors, we have complete reserves of open loop, closed loop, and optical anti-shake technology; and self-developed encryption algorithms and security protection technology in the field of smart card chips have improved product security.

Based on long-term technology accumulation and a good customer base, the company continues to upgrade technology and develop products, further consolidating and enhancing the company's competitive advantage in downstream applications such as smartphone camera modules.

Iterative chip upgrades to seize market development opportunities

As a global high-tech integrated circuit design enterprise, the company specializes in R&D, design and sales of high-performance, high-quality integrated circuit products. Currently, it has three main product lines: memory chips, voice coil motor driver chips, and smart card chips. Among them, the company's industrial-grade EEPROM products and voice coil motor driver chip products benefited from the successful iteration of the product line, and product shipments grew rapidly over the same period last year. At the same time, with the improvement in the inventory level of downstream memory module manufacturers and the continuous increase in the penetration rate of DDR5 memory modules, the company's sales volume of SPD products increased significantly year-on-year in Q1, creating more space for the company's business; NOR Flash products shipped more than 56 million units in Q1 in 2024, accounting for about 70% of sales in the full year of 2023; in terms of automotive-grade EEPROM products, the company is actively expanding key overseas markets such as Europe, South Korea, Japan, etc., with mainstream domestic and foreign automobile manufacturers and many industries Leading Tier 1 suppliers of automotive electronics have worked closely together to further strengthen their brand recognition and market competitiveness. In the future, the company's multi-line business development will show a good development trend.

Profit forecasting

It is predicted that the company's revenue for 2024-2026 will be 10.39 billion yuan, 13.27 billion yuan, and 4.08 yuan for EPS, respectively. The current stock price is 27.2, 19.0, and 13.8 times PE, respectively. As the penetration rate of DDR5 memory modules continues to increase, the company's SPD product sales and revenue will increase significantly in Q4 2023, especially since December. There is a clear recovery trend in related businesses, maintaining a “buy” investment rating.

Risk warning

Macroeconomic risks, risk of product development falling short of expectations, risk of increased industry competition, risk of downstream demand falling short of expectations.