Revenue in the first half of the year increased 79% year-on-year, and DDR5 second-generation RCD chip shipments surpassed first-generation sales. According to the company's performance pre-increase announcement, revenue for the first half of 2024 is expected to be 1.665 billion yuan, up 79.49% year on year; net profit to mother is 0.583 billion yuan to 0.623 billion yuan, up 612.73%-661.59% year on year; net profit without return to mother is 0.535 billion yuan - 0.565 billion yuan, up 139.25-147.12 times year on year. Demand for the company's memory interface and module supporting chips achieved restorative growth in the first half of the year. The DDR5 downstream penetration rate increased and DDR5 sub-generation iterations continued to advance. In the first half of the year, shipments of DDR5 second-generation RCD chips surpassed first-generation RCD chips; at the same time, some of the company's new AI “capacity” chip products began large-scale shipments, contributing new performance growth points to the company.

Second-quarter revenue and net profit to mother both increased month-on-month, and revenue from connected chips hit a quarterly high. The company's 2Q24 revenue was 0.928 billion yuan (YoY +83%, QoQ +26%), net profit due to mother was 0.36 billion yuan - 0.4 billion yuan (YoY +543%, QoQ +61% to +79%); net profit after deducting non-attributable income was 0.315 billion yuan - 0.345 billion yuan (QoQ +44% to +57%), an increase of 89—97 times year-on-year. Among them, the revenue of connected chips is expected to reach 0.833 billion yuan, an increase of 19.92% over the previous month, setting a record high in sales revenue for this product line in a single quarter. The gross margin is expected to be 63%-64%, further increasing from month to month. In addition to the increase in revenue from memory interfaces and module supporting chips, the company's three new AI “capacity” chip products benefited from AI demand and achieved revenue of 0.13 billion yuan, a significant increase over the previous month.

Three new AI “capacity” chip products progressed smoothly, and CKD chips were shipped on a large scale in the second quarter. The company's three new AI high-performance “capacity” chip products are progressing smoothly. Among them, PCIe Retimer chips have benefited from strong demand for global AI servers and increased market share. After 1Q24 shipped about 0.15 million pieces, 2Q24 shipped about 0.3 million; MRCD/MDB chips benefited from AI and high-performance computing's demand for higher bandwidth memory modules, and server high-bandwidth memory modules with the company's products began to be tested on a large scale in mainstream cloud computing/Internet vendors at home and abroad. Following After 1Q24's revenue exceeded 20 million yuan, 2Q24's revenue exceeded 50 million yuan; CKD chips benefited from AI PC industry trends, and the release of new client CPU platforms was approaching, relevant memory module manufacturers began mass procurement of CKD chips for preparation. The company's CKD chip 2Q24 began large-scale shipments, and revenue in a single quarter exceeded 10 million yuan.

Investment advice: The scale of the new product was shipped smoothly, maintaining the “superior to the market” rating. Considering the smooth shipment of the company's new product scale, we raised the company's net profit to the mother in 2024-2026 to 1.348/1.938/2.638 billion yuan (previous value was 1.183/1.789/2.454 billion yuan), and the PE corresponding to the stock price on July 5, 2024 was 49/34/25x, respectively. The company's new products were shipped smoothly on a large scale and maintained a “superior to the market” rating.

Risk warning: New product development falls short of expectations; customer verification falls short of expectations; demand falls short of expectations.