Incident: Lanqi Technology announced the 2024 interim report pre-increase. The company expects 24H1 to achieve revenue of 1.665 billion yuan, a year-on-year increase of 79.49%; achieve net profit of 5.83 to 0.623 billion yuan, a year-on-year increase of 612.73 to 661.59%; and achieve deduction of non-net profit of 5.35 to 0.565 billion yuan, an increase of 13924.98 to 14711.96% year-on-year.

Q2 revenue and profit increased year-on-month. Looking at the 2024Q2 single quarter, the company achieved revenue of 0.928 billion yuan, up 82.6% year on year and 25.8% month on month; realized net profit of 3.60 to 0.4 billion yuan, up 479.1-543.5% year on year and 61.0 to 78.9% month on month; realized deducted non-net profit of 3.15 to 0.345 billion yuan, up 8911.4 to 9768.6% year on year, and 43.6 to 57.3% month on month.

By product structure, 24H1 achieved revenue of 1.528 billion yuan for interconnect chips and 0.13 billion yuan for the Jinjue server product line, corresponding to the single quarter revenue of 0.833 billion yuan for 24Q2 interconnect chips, an increase of 67.6% year-on-year, and 0.091 billion yuan of revenue for the Jinjue server product line, an increase of 911.1% over the previous year. Interconnect chips are still the incremental center of the company's performance.

DDR5 accelerates the resurgence of growth in penetrating driver interface chips. The company began batch shipment of DDR5 second-generation RCD chips in October 2023, and 24H1 shipments have surpassed first-generation RCD chips. Large-scale shipments of third-generation RCD chips are expected to begin at 24H2. The company also launched fourth-generation RCD chips in January 2024, and samples have already been sent to major memory customers. The accelerated penetration of DDR5 and the iteration of DDR5 sub-generations have brought continued demand for the company's interface chips.

Demand for AI continues, and three new capacity chips are being released rapidly. The company has deployed a variety of new high-performance capacity chip products in the field of AI computing power, and 24Q2 has achieved rapid deployment.

1) PCIe Retimer chips: 0.3 million units shipped monthly in 24Q2, doubling month-on-month; 2) MRCD/MDB chips: meeting the demand for high-bandwidth memory modules for AI high-performance computing, large-scale trials with mainstream cloud computing and Internet vendors, 24Q2 revenue exceeded 50 million yuan, more than doubling month-on-month; 3) CKD chips: pioneered trial production in the industry in April 2024, benefiting from the demand for AIPC and high-speed memory platforms. million yuan.

Investment advice: As a leader in the field of memory interface chips, the company has deeply benefited from the acceleration of DDR5 penetration, and the company has developed new products such as PCIe retimer, CXL memory controller (MXC), CKD and MCR memory controllers (MRCD and MDB), and the subsequent growth path is clear. We expect the company's net profit to be 1.433/2.18/2.62 billion yuan in 2024-2026, respectively, and the corresponding PE is 46/30/25 times, respectively. Maintain a “Recommended” rating.

Risk warning: DDR5 penetration rate falls short of expectations; industry competition intensifies; new product development and sales progress falls short of expectations.