Key points of investment

On April 29, 2024, the company released its report for the first quarter of 2024.

24Q1's performance grew rapidly, and the share of CIS and 55nm revenue increased. In 24Q1, the company achieved revenue of 2,228 billion yuan, an increase of 104.44%; net profit to mother was 79.2588 million yuan, up 123.98% year on year; net profit after deducted from mother was 57.3097 million yuan, up 114.87% year on year; gross profit margin was 24.99%; year on year increase of 16.97 percentage points. The year-on-year increase in the company's performance is mainly due to 1) the recovery in the semiconductor industry's prosperity and a recovery in overall market demand; 2) the company continues to optimize its product structure, strengthen its technical strength, and improve the competitiveness of the product market; 3) the company's capacity utilization rate remains at a high level, while unit sales costs have declined.

Judging from the application product classification, CIS accounts for a significant increase in the proportion of main business revenue and has become the company's second largest product axis. 24Q1's DDIC/CIS/PMIC/Logic/MCU revenue was 15.75/2.91/1.91/0.76/ 0.58 billion yuan respectively, accounting for 71.82%/13.27%/8.69%/3.48%/2.66% of the main business revenue, respectively. Looking at the classification of process nodes, 24Q1's 55/90/110/150nm revenue was 2.24/9.80/6.77/312 million yuan respectively, accounting for 10.23%/44.69%/30.88%/14.21% of main business revenue, respectively. The share of 55nm in the main business revenue increased rapidly. Mainly, the company achieved large-scale mass production of 55nm and high market demand, and maintained a high level of capacity utilization.

DDIC: The recovery of the panel industry combined mass production orders with OLED platforms to push the company back to a high-growth trajectory. The company 55nm TDDI has achieved large-scale mass production and maintained a high capacity utilization rate. The development of a 145nm low-power high-speed display driver platform has been completed. On the OLED side, the 40nm high-voltage OLED display driver chip successfully illuminated the panel for the first time. It is expected that 24Q2 will achieve small-batch mass production; 28nm product development is progressing steadily. In the field of AR/VR micro displays, the company is actively developing silicon-based OLED-related technologies, and has developed in-depth cooperation with leading domestic panel companies to accelerate application implementation.

Omdia said 2024 will be a year of recovery for the panel industry, and display panel sales are expected to increase 7% year over year; demand for DDIC is also expected to rebound to 8.2 billion units, up 4% year over year. Chinese panel companies are actively developing the OLED market. The OLED production lines built by panel manufacturers such as BOE, Vicino, and Tianma Microelectronics are expected to be fully put into operation within the next few years, which is expected to stimulate demand for OLED panel driver chips.

We believe that as the world's leading manufacturer of display driver chips, Crystal Synthesis is expected to return to a high growth trajectory as the OLED process platform receives mass production orders, and the recovery of the panel industry drives the volume of the original platform.

CIS: 55nm single-chip, high-pixel BSI achieved mass production. The second product spindle is becoming more mature, and the company's 55nm single-chip, high-pixel back-illuminated image sensor BSI ushered in mass production, making smartphone applications leapfrog from low to medium to high-end applications. In addition, the company's 14 million BSI stacked process has been delivered to major domestic mobile phone manufacturers. The company said CIS production capacity will double in 2024, and the share of shipments will increase significantly, making it the second largest product spindle other than display driver chips.

Investment advice: In view of continued breakthroughs in the company's process platform, while maintaining high R&D investment, and high fixed costs, we adjusted our original 24/25 performance forecast. It is estimated that from 2024 to 2026, the company's revenue will be 100.69/128.90/15.210 billion yuan, respectively (the original forecast value for 24/25 was 100.27/12.836 billion yuan), with growth rates of 39.0% /28.0/ 18.0%, respectively; net profit to mother will be 8.17/12.13/1,515 billion yuan (the original forecast value for 24/25 was 10.25/1,423 billion yuan), respectively; the growth rates will be 286.3%/48.4%/24.9% respectively; PE 35.9/24.2/19.4. As a global leader in display driver chip foundry, the company has achieved remarkable results in diversified process platform layout and continues to develop into more advanced process nodes. Continued recommendation, maintaining a “buy-A” rating.

Risk warning: Downstream terminal market demand falls short of expectations; risk of new technologies, new processes, and new products not being industrialized as scheduled; risk of capacity expansion falling short of expectations; risk of market competition increasing risk; systemic risk, etc.