Incidents:

On August 12, Xinjie Energy released its 2024 semi-annual report: 2024H1 achieved revenue of 0.873 billion yuan, up 15.16% year on year, of which 2024Q2 revenue was 0.502 billion yuan, up 30.4% year on year and 35% month on month. In terms of gross margin, 2024H1's gross profit margin was 35.78%, up 5.24 pcts year on year; of these, 2024Q2 gross profit margin was 36.53%, up 6.85 pcts year on year, and 1.77 pct month on month. In terms of net profit, 2024H1 net profit attributable to mother was 0.218 billion yuan, up 47.45% year on year; of which 2024Q2 net profit was 0.118 billion yuan, up 42.25% year on year, up 17.5% month on month; 2024H1 net profit without return to mother was 0.214 billion yuan, up 55.21% year on year, of which 2024Q2 net profit from non-return mother was 0.131 billion yuan, up 75.96% year on year, up 56.33% month on month.

Investment highlights:

n Financial analysis: Demand growth accelerated inventory digestion, and gross margin achieved month-on-month growth for 4 consecutive quarters. Since the 2024 Spring Festival, the traditional downstream market has gradually recovered, demand in emerging sectors has increased significantly, and the company's inventory digestion has accelerated. From the 2023Q3 inventory high of 0.516 billion yuan, it has declined for 3 consecutive quarters. As of 2024H1, it has dropped to 0.33 billion yuan. In terms of revenue and profitability, the company uses technology and product advantages to actively adjust the product structure, market structure and customer structure to promote the continuous expansion of the company's sales scale. The company's gross margin has achieved 4 consecutive quarters of month-on-month growth, from 29.68% in 2023Q2 to 36.53% in 2024Q2.

Looking at n products: Automotive+AI servers help SGT MOS release rapidly, and the recovery of optical storage is expected to drive IGBT to resume growth in the second half of the year. (1) SGT MOS: 2024H1 achieved revenue of 0.36 billion yuan, a year-on-year increase of 40.29%, and its sales share rose to 41.44% from 33.95% in the same period last year. As the product with the company's largest sales base and largest customer base, some parts of the company's SGT MOSFET are currently in short supply. Benefiting from a recovery in automotive electronics, industrial control, and pan-consumer applications, 2024H1 sales have increased significantly. In AI computing power server applications, multiple SGT products have been shipped, and sales of SGT products are expected to continue to increase in the second half of the year. (2) IGBT: 2024H1 achieved revenue of 0.141 billion yuan, a year-on-year decline of 22.64%, and its sales share fell to 16.2% from 24.07% in the same period last year.

The decline in 2024H1 is mainly due to the fact that demand from optical storage customers is still recovering, and sales levels have not reached the same period last year. The company is actively expanding new applications including frequency conversion, small household appliances, industrial automation, automotive electronics, etc. It is expected that the second half of the year will be accompanied by a further recovery in photovoltaic IGBTs and the increase in the number of new high-current IGBT single tubes, and sales will increase over the first half of the year. (3) SJ MOS: 2024H1 achieved revenue of 0.102 billion yuan, a year-on-year increase of 8.49%, accounting for 11.78% of sales. The company's latest fourth-generation product series has begun to be delivered in batches, and the second half of the year will be further promoted in the fields of major appliances, AI servers, automotive OBC, etc., and it is expected that sales of the company's SJ-MOSFET products will reach a new level. (4) Trench MOS: 2024H1 achieved revenue of 0.255 billion yuan, a year-on-year increase of 19.64%, accounting for 29.3% of sales. After the 2024 Spring Festival, Trench MOS sales increased in line with the recovery in demand for industrial control, pan-consumption, and automotive electronics.

By application: 2024H1 optical storage has picked up significantly, and automotive and AI shipments are growing rapidly. The company's 2024H1 downstream applications account for: industrial control (42%), pan-consumption (18%), optical storage (14%), automobiles (13%), AI computing power and communications (9%), and intelligent short-distance transportation (4%). (1) Automotive sector: The number of products supplied by the company increased by more than 50% year-on-year in 2024H1. Various models are used in important three-electric power modules such as OBC and DC conversion. The cooperation with BYD enabled the introduction of more vehicle specification products and further expanded the scale of cooperation with BYD. The company continues to make domestic brands the largest number of products shipped in the automobile market and the largest total number of shipments as the company's sales target. (2) Optical storage sector: Demand for 2024H1 has picked up significantly. The mixed grid and off-grid market within 20KW is affected by unstable power supply factors in Africa and other regions. Demand in this market is growing rapidly. The company actively develops and introduces IGBT, SGT and other products, resulting in effective sales growth. (3) AI field: The company is actively developing products related to AI computing power servers. It has now been finally applied to leading overseas customers in the GPU field and has achieved mass sales, and is expected to maintain rapid growth in the future.

Profit forecasting and investment rating companies are leading domestic power semiconductor companies. Since the first half of 2024, against the backdrop of a gradual recovery in the downstream market, the company's inventory digestion has accelerated, while actively and keenly grasping market conditions, increasing production schedules ahead of schedule to meet new market demand, and thus drive steady growth in performance. Therefore, we adjusted the company's profit forecast. The company's revenue for 2024-2026 is estimated to be 1.889/2.427/2.952 billion yuan, net profit to mother is 0.48/0.59/0.702 billion yuan, EPS is 1.16/1.42/1.69, respectively, and the corresponding PE is 27/22/19 times, respectively, maintaining a “buy” rating.

Risk warning 1) Increased competition in the semiconductor industry 2) Demand for new energy sources falls short of expectations 3) Company R&D falls short of expectations 4) Company product introduction falls short of expectations 5) Fab capacity guarantee capacity has declined.