Incident: The company released its 2024 semi-annual report. 24H1 achieved operating income of 0.515 billion yuan, +62.37% year over year, and realized net profit of 0.143 billion yuan to mother, an increase of 124.93% year on year. After deducting non-net profit, it was 0.145 billion yuan, an increase of 222.60% year on year. According to calculations, 24Q2 revenue was 0.267 billion yuan, +54.02% YoY, +8.18% month-on-month, net profit to mother was 0.092 billion yuan, +118.24% YoY, deducted non-net profit 0.079 billion yuan, YoY +180.25%, 24Q2 comprehensive gross margin was 54.77%, +7.32pct YoY, +0.15pct month-on-month.

The company's SPD business is expected to achieve high growth in 2024. In the first half of '24, as the penetration rate of DDR5 memory modules continued to increase and the inventory levels of downstream memory module manufacturers improved, the sales volume of the company's SPD products supporting DDR5 memory modules increased significantly compared to the same period last year. The industry expects the penetration rate of DDR5 memory modules to exceed 50% in mid-2024, and will continue to increase in 25 years. Continued penetration of DDR5 will help the company's SPD product sales revenue to continue to grow.

Automotive EEPROM is actively expanding the market. The company now has a full range of automotive-grade EEPROM products of grade A1 and below. The products are widely used in dozens of sub-modules of four major systems, including smart cockpits, three-electric systems, visual perception, chassis transmission and micromotors. The end customers cover mainstream automobile manufacturers at home and abroad. The company is also actively expanding into key overseas markets. In the first half of '24, the company achieved a high year-on-year increase in automotive EEPROM shipments and revenue, and its market share is expected to continue to increase.

NOR Flash products have been shipped in large quantities in the 512Kb-32Mb capacity range, and 64Mb-128Mb products have successfully completed streaming. Sales of NOR Flash products exceeded 0.17 billion units in the first half of the year, and 24Q2 shipments increased by more than 100% compared to 24Q1. In the vehicle regulation market, products with a capacity of 512 Kb-8 Mb have passed the AEC-Q100 Grade 1 vehicle reliability verification, while actively promoting vehicle regulation verification for products with a capacity of 16 Mb and above. The company's closed-loop and OIS voice coil motor driver chip products in multiple specifications have been tested and verified by industry-leading smartphone manufacturers, and some specifications and models have been shipped in small quantities.

Profit forecast: The company's revenue for 24-26 is 1.069, 1.398, and 1.651 billion yuan, respectively, and net profit to mother is 0.342, 0.494, and 0.629 billion yuan, maintaining a “buy” rating.

Risk warning: product development risks; increased industry competition; risk of DDR5 penetration falling short of expectations