Report highlights:
The market is concerned about the analog chip cycle and TI production capacity release. We believe that at this point, consumption has begun to recover, while many signals indicate that the industry is expected to recover in Q3, and automobiles will enter the inventory replenishment phase in 24Q4-25Q1. The pace of industry recovery is driving the company back to the growth cycle at an accelerated pace. The market is worried about the impact of TI's capacity release on prices and the growth of domestic companies. Looking at this stage, the most uncertain stage is over. TI's successor is becoming less likely to adopt an aggressive pricing strategy in China, and the company has shown good business resilience and growth potential in the face of TI's price reduction strategy. The company has greatly increased both in terms of market share and product gross margin, and has even reached or exceeded pre-pandemic levels.
At this stage, we have covered and given a “gain” rating, mainly seeing the following changes in investment logic 1) The company's financial data for the first quarter shows that the company's product structure optimization and new product echelons have absorbed the pressure brought about by the downward cycle and overall price decline to a certain extent.
2) In this round of long-term downturn, the company demonstrated the systematic resilience of its business ecology and product structure to risks during the downward phase of the cycle. Along with the recovery, the certainty of revenue growth is expected to continue to increase, while profitability may increase or exceed expectations.
3) Overseas industries and automobiles are still waiting for an upward cycle. The company's revenue in the industrial, automotive and communications sectors accounts for 47% of total revenue. It is expected to enter a significant growth trajectory in the second half of this year and the first half of next year, providing greater flexibility and valuation support for the company's profits.
4) The progress and price strategy of TI's expansion of production had little impact on the company, but there is a trend of increasing market share under TI's price reduction pressure.
5) Although the company's revenue is no longer small, several dimensional data prove that the company's medium- to long-term growth trend is still worth looking forward to.
Investment advice and profit forecasting
The company was given a 24-year 70x valuation, corresponding to a target price of 96 yuan. Covered for the first time, a “gain” rating was given.