Key points of investment:

2024 interim report performance forecast: 2024H1 Jiang Bolong's revenue was 8.8-9.2 billion yuan, net profit was about 5.2 to 0.61 billion yuan, after deducting non-net profit of 0.47-0.56 billion yuan, a change of about 187.26% to 202.36% compared with net profit of 595.9499 million yuan for the same period last year.

In 24H1, the employee incentive share payment amount was about 0.146 billion yuan, of which 24Q1/Q2 was 0.083/0.063 billion yuan, respectively.

The median revenue of 2024Q2 continued to increase month-on-month. 2024Q2's revenue was approximately 4.347-4.747 billion yuan, and net profit was 0.14-0.23 billion yuan.

1Q24 revenue was 4.453 billion yuan, up 200.54% year over year. The gross profit margin for the 1Q24 quarter was 24.4%, and the month-on-month increase was close to 6pct; net profit to mother was close to an all-time high, second only to profit for the 2021/Q2 quarter, with a quarterly net interest rate of 8.6%.

Since 2023H2, the global semiconductor storage market has been in an upward cycle. 24Q2 has entered a storage supply and demand game period, and spot price increases have slowed. According to TrendForce, the NAND Flash 24Q1/24Q2 price indices were 28-30%/15-20%, respectively, and 24Q3 prices are expected to continue to rise 5-10%. Due to the weak consumer market, demand did not pick up as planned, so the high growth in storage spot prices slowed down. In 2023, Jiang Bolong's embedded storage accounted for 44% of revenue, solid-state drives accounted for 28% of revenue, mobile storage accounted for 23%, memory stick products accounted for 5% of revenue, and other products accounted for 0.6%.

Jiang Bolong has two major storage brands, industry-class storage FORESEE and international high-end consumer Lexar, leading the market share of many storage products. According to Omdia data, in 2021, Lexar memory cards ranked second in the global market share, and Lexar flash drives (USB drives) ranked third in the global market share. According to TrendForce's 2021 ranking of global SSD module companies' private brand channel market shipments, the Lexar brand ranked fourth in the world in terms of shipment volume in this market. According to the CFM flash memory market, the company ranked 6th in the world for eMMC & UFS market share in 2022.

All four types of storage products have expanded from consumer-level to enterprise-grade and automotive-grade storage. Explosive data growth has created huge demand space for enterprise-grade storage. Automobiles are becoming more intelligent, bringing opportunities for automotive-grade storage. According to Gartner, the global ADAS sector's NAND Flash storage consumption is expected to reach 4.15 billion GB by 2024. Jiang Bolong's more powerful automotive-grade UFS will replace eMMC and become a forward-looking choice for car manufacturers.

Accelerate self-developed SLC/MLC NAND Flash and master control chips to build a core barrier. Shipments of SLC NAND chips exceeded 10 million units in 2023, and the first self-developed 32Gb MLC NAND chip was released in 2024. In 2023, Jiang Bolong began mass production of the main control product LS600/LS500, which supports high-end eMMC and memory cards.

Accelerate the vertical integration of test equipment and packaging production capacity. In terms of business model, Jiang Bolong mainly focuses on R&D, design and brand operation of semiconductor storage application products, including firmware algorithm development, system-level integrated package design (SiP), memory chip test algorithms, and storage application technology development. In 2023, Jiang Bolong acquired Yuancheng Suzhou, Zilia Brazil (Zilia), and Zhongshan Phase II to build self-sufficient manufacturing capabilities.

Maintain profit forecasts and maintain a “buy” rating. 2024Q2's performance is in line with expectations, maintaining the 2024-2026 net profit forecast of 1.584/0.985/1.378 billion yuan, PE 22X in 2024, and maintaining a “buy” rating.

Risk warning: 1) risk of supplier concentration; 2) risk of wafer and product price fluctuations; 3) risk of technology iteration