Incident: The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 2,616 billion yuan in 2023, a year-on-year decrease of 17.94%; realized net profit of 281 million yuan, a year-on-year decrease of 67.86%; and realized deduction of 212 million yuan in non-net profit, a year-on-year decrease of 74.99%. In Q1 2024, we achieved revenue of 729 million yuan, up 42.03% year on year, down 0.75% month on month; realized net profit of 54 million yuan, up 80.04% year on year, down 60.80% month on month; realized deducted non-net profit of 50 million yuan, up 713.11% year on year and down 57.32% month on month.

The 23-year results were under pressure, and the Q1 performance in 2014 grew rapidly: the company's performance was under pressure for the full year of 2023, mainly because the weak global macroeconomic situation did not improve, and overall semiconductor demand was still sluggish. In 2024, the company achieved rapid year-on-year growth in Q1, mainly due to an increase in sales volume of the company's products and a corresponding increase in revenue. In Q1 2024, the company's gross margin was 52.49%, down 0.17 pcts year on year, up 5.27 pcts month on month; the company's net margin was 7.06%, up 1.62 pcts year on year, down 11.14 pcts month on month.

In terms of expenses, the company's sales, management, R&D and financial expenses in Q1 2024 were 7.79%/3.64%/28.52%/-1.49%, respectively, with year-on-year changes of -1.40/-0.55pct. The company's expense rates all declined during the period, and the company successfully reduced costs and increased efficiency significantly.

The product matrix continues to be enriched, and the number of new products is worth looking forward to: the company focuses on the research and development of analog chips. The product performance and quality are compared to world-class analog manufacturers, and some key performance indicators are superior to similar foreign products. For example, the company launched a number of high-performance analog chip products such as the industry's ultra-low power operational amplifiers and comparators, high-precision current sensing amplifiers, ultra-low power step-up DC/DC converters, and step-down DC/DC converters. At present, the company has independently developed more than 5,200 marketable products, covering 32 product categories, which can meet the diversified needs of customers. At the same time, the company has now achieved certain results in the fields of automotive electronics, green energy, intelligent manufacturing, next-generation mobile communications, the Internet of Things, smart homes, wearable devices, drones and artificial intelligence. In the future, it will continue to take advantage of product performance and rapid market response, and cooperate closely with customers to accurately and promptly seize business opportunities and further expand domestic and foreign market share. On the market side, the company gave full play to the competitive advantages of its products in various aspects such as performance, quality and service, and maintained steady development in application fields such as industrial control, automotive electronics, communication equipment, consumer electronics and medical devices, and the number of application segments was constantly increasing. While expanding existing market areas, the company also actively lays out in application fields such as the Internet of Things, new energy, artificial intelligence, communications, etc., to seize market opportunities and expand market share. On the basis of the continued activity of existing products, the company launches hundreds of new products every year, so that the number of products the company can sell continues to accumulate, providing long-term and steady support for the company's performance growth.

The semiconductor market is gradually picking up, and high-end products are consolidating their leading position: According to SIA statistics, in the fourth quarter of 2023, global semiconductor sales were US$146 billion, up 11.6% year on year and 8.4% month on month, showing an improvement trend. In 2024, as demand for artificial intelligence, high-performance computing, and new energy vehicles continued to grow, and consumer electronics market demand represented by smartphones and personal computers gradually picked up, many market research institutions gave relatively optimistic growth expectations for the development of the semiconductor industry in 2024. In 2023, the global semiconductor integrated circuit industry was affected by factors such as weak overall economy, inflationary pressure, energy price fluctuations, declining consumer confidence, and inventory removal. Most segments were still in a period of contraction and adjustment. Global semiconductor sales declined year-on-year. This situation gradually eased in the fourth quarter of 2023, and is expected to grow in 2024. The development of the company's new products is gradually showing a trend of multifunctionality, high-end, and complexity. More new products use more advanced processes and packaging forms, such as next-generation high-voltage BCD technology with lower on-resistance, 90nm analog and mixed signal technology, and WLCSP packaging. The company has always had strict requirements for the reliability, anti-interference, production yield and stability of chip products. All indicators have reached the first-class level of the same industry at home and abroad, and have strong market competitiveness. The company has continuously obtained ISO9001 and ISO14001 quality and environmental management system certifications. We believe that as the company's products continue to become multifunctional and high-end, the company's market competitiveness is expected to be further strengthened and the company's leading position in the field of analog chips will be strengthened.

Lowering profit forecasts and maintaining the “gain” rating: The company focuses on the research and development of analog chips. The product performance and quality are compared to world-class analog manufacturers, and some key performance indicators are superior to similar foreign products.

By completing signal chain and power management analog chip development and industrialization projects, the company actively expands the product line, enhances product performance and broadens product application areas, and continues to enhance the company's core competitiveness. In 2023, due to changes in the industry cycle, terminal market sentiment and declining demand, we lowered the company's profit forecast. The company's net profit forecast for 2024-2026 is estimated to be 436 million yuan, 644 million yuan, and 971 million yuan, EPS 0.93 yuan, 1.37 yuan, 2.07 yuan respectively, and PE 88X, 60X, and 40X respectively.

Risk warning: risk of exchange rate fluctuations, downstream demand recovery falling short of expectations, risk of technological innovation, risk of market competition.