occurrences
Recently, the company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 306 million yuan, a year-on-year decrease of 29.41%; net profit to mother was 173 million yuan, a year-on-year decrease of 914.12%. In the first quarter of 2024, the company achieved operating income of 81 million yuan, up 12.23% year on year, down 8.34% month on month; net profit to mother - 0.3 million yuan, down 77.00% year on year, reducing losses from month to month.
Key points of investment
Losses were reduced month-on-month in 24Q1, waiting for the industry to recover. In 2023, the semiconductor industry in which the company is located was affected by cyclical fluctuations. Downstream demand continued to weaken. The company actively consolidated and expanded its market share. Product shipments increased year-on-year, but due to a sharp drop in the price of its main products, the company's operating income and gross margin levels declined significantly. In 2023, the company achieved operating income of 306 million yuan, a year-on-year decrease of 29.41%; realized net profit to mother - 173 million yuan, a year-on-year decrease of 914.12%. In 2023, in order to further improve the core competitiveness and market share of products, the company increased R&D investment and sales efforts. Among them, R&D expenses increased 55.07% year on year, which is quite significant. Meanwhile, in 2023, the company's inventory turnover rate declined, and inventories were under pressure. The company depreciated inventory based on the principle of prudence, and prepared an inventory price drop of nearly 100 million yuan, a significant increase over the previous year. 2024Q1 achieved operating income of 81 million yuan, an increase of 12.23% year on year and a decrease of 8.34% month on month; net profit to mother was -0.3 million yuan, down 77.00% year on year, and the month-on-month decline narrowed. It is expected that profitability will continue to improve in the future as prosperity gradually recovers.
Improve the core competitiveness of products and promote the commercialization process of AI chips. (1) NorFlash: In 2023, the company actively promoted the research and development of multiple product lines, achieved mass production of a full range of capacity products from 2 Mbps to 256 Mbti, and completed the flow film for two products within the year. One of the products has already entered the sample delivery stage, and the other seven products have been successfully mass-produced. The company continues to optimize the advanced ETOX process, focusing on 50nm and 55nm nodes to achieve lower power consumption and higher energy efficiency ratios. Some models of the company's products, such as ZB25D40C (4mb) and ZB25VQ32D (32mn), perform better or equal to competing products in terms of reading, writing, and erasing current. (2) MCU: In 2023, the company successfully designed a new low-power M3-core MCU general-purpose chip, which can be better used in high-speed brushless DC motors, automotive electronics and other applications. At present, the company has basically completed the layout of the MCU general low-power product line, giving customers more comprehensive MCU options based on the M0+ core, and has made significant progress in major customer development. (3) AI chip: In terms of AI memory and inference chips, the company optimized and iterated the calculation module based on the first version of CiNor's principle verification, reducing energy consumption, improving calculation accuracy, and expanding the calculation scale to adapt to larger AI algorithm models. In the field of TinyML AI software development, five types of algorithm models have been successfully developed, including visual segmentation, visual recognition, speech recognition, voice printing, and voice noise reduction, and the deployment of these TinyML AI algorithms on various computing hardware platforms such as ARM, RISC, and DSP has further enhanced the applicability and flexibility of the software. In terms of commercializing AI modules, the company first sold AI vision modules in 23Q2 and shipped AI voice modules for the first time in 23Q4. It successfully established the first batch of AI commercial customers, laying a solid foundation for the future development of AI business.
Investment advice:
We expect the company to achieve revenue of 463/647/892 million yuan in 2024/2025/2026, and realized net profit of 0.02/0.64 billion yuan respectively, giving it a “buy” rating.
Risk warning:
Downstream demand recovery fell short of expectations; new product development fell short of expectations; increased market competition, etc.