Revenue for the first half of the year increased 8.7% year over year, and sales of all product lines increased year over month. According to the company's performance forecast, revenue for the first half of 2024 is expected to be 1.459 billion yuan, up 8.7% year on year; net profit due to mother is -73.5 million yuan to -59.5 million yuan, down 134.26% to 142.33% year on year; net profit without return to mother is -47 million yuan to -35 million yuan, down 169.96% to 193.95% year on year. The year-on-year decline in profit was mainly due to a decline in gross margin and a decline in stock holdings. However, product sales increased month-on-month, with sales of 6-inch semiconductor silicon wafers being 6.6885 million (including 0.9945 million chips sold to the parent company), up 46.22% year on year, up 26.94% month on month; sales of semiconductor power device chips were 0.9016 million chips, up 4.96% year on year, up 5.22% month on month; compound semiconductor RF chip sales were 0.0176 million chips, up 288.18% year on year, up 31.84% month on month.

Revenue increased month-on-month in the second quarter, with net profit not attributable to mother turning a loss into a profit. The company's 2Q24 revenue was 0.78 billion yuan (YoY +10%, QoQ +15%), and net profit to mother was -10.35 million yuan to +3.65 million yuan. The loss margin was significantly narrower than 1Q24; net profit after deducting non-attributable net profit of +2.36 million yuan to +14.36 million yuan, turning the loss into a profit.

Sales of 2Q24 equivalent 6-inch semiconductor silicon wafers were 3.5767 million wafers (including 0.5748 million wafers sold by Opponent's parent company), up 14.94% month-on-month, of which 12-inch silicon wafers sold 0.2361 million wafers, up 37.75%; semiconductor power device chips sold 0.4828 million chips, up 15.30% month-on-month; and compound semiconductor RF chip sales were 0.0086 million chips, down 4.49% month-on-month.

Prices and capacity utilization rates for some products have rebounded. Currently, the company's 6/8-inch epitaxial wafer production capacity is in short supply, which led to a month-on-month increase in the average shipping price of 6-8 inch silicon wafers in the second quarter, and the price of 12-inch silicon wafers remained stable. The current production capacity of power device chips is about 0.235 million chips/month. In addition to the dedicated production capacity reserved for some key customers, shipments of the latest products are close to full production, and the market prices of some products have rebounded. The current production capacity of the compound semiconductor RF chip base in Hangzhou is about 0.09 million chips/year. The capacity utilization rate increased year-on-year in the first half of the year. The Haining base is expected to be put into commercial operation in the fourth quarter of 2024. The first phase production capacity is about 0.06 million chips/year.

Investment advice: short-term profits are under pressure, maintaining a “neutral” rating

We expect the company's net profit to be 0.144/0.259/0.372 billion yuan in 2024-2026 (previous value was 0.15/0.262/0.376 billion yuan), and PE corresponding to the stock price on July 9, 2024 is 109/61/42x, respectively. Short-term profits are under pressure, maintaining a “neutral” rating.

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