Incidents:

The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 0.873 billion yuan, an increase of 15.16% over the previous year; realized net profit of 0.218 billion yuan, an increase of 47.45%; net profit after deducting non-return to mother was 0.214 billion yuan, an increase of 55.21%. In the second quarter of 2024, the company achieved revenue of 0.502 billion yuan, an increase of 35.01% over the first quarter.

Downstream market recovery is compounded by application demand in new fields to accelerate product inventory transformation:

In the first half of 2024, benefiting from the recovery in the downstream market combined with increased application demand in emerging fields, the company's product orders continued to grow, and inventory was quickly digested. The company increased production schedules ahead of schedule to respond positively to market changes and customer needs. Among the company's products, SGT-MOSFET products, the product platform with the largest sales base and the largest customer base, achieved significant sales growth in the first half of the year or even in short supply. The semi-annual report revealed that the product achieved revenue of 0.36 billion yuan in the first half of the year, an increase of 40.29% over the same period last year, and the share of sales increased to 41.44%. It is expected that the sales volume of SGT products in the second half of the year will still benefit from the continued increase in the application of AI computing power servers.

Steadily improve services and actively develop customers in new fields:

After the company switched to direct supply in automotive electronics at the end of 2023, the number of products supplied increased by more than 50% year-on-year in the first half of 2024, and various models were used in important three-electric power modules such as OBC and DC conversion, further expanding the scale of cooperation. The photovoltaic energy storage market has picked up significantly. The company has stabilized cooperation with leading customers in the photovoltaic industry, grasped the increase in effective orders, and created new growth momentum. In addition, the company continues to focus on and accelerate the deployment of emerging fields, actively responds to the computing power revolution, develops products around the needs of AI computing power servers, and has achieved mass sales to leading overseas customers in the GPU field; at the same time, it continues to lay out the low-altitude economy industry to steadily improve the reliability of MOSFET products used in core components such as drone BMS and electric drives.

Pay attention to R&D investment and continuously improve the competitiveness of core products:

The company is further strengthening research and development of AI and data centers, new energy optical storage and charging, automotive electronics, industrial automation, and semiconductor power module products. The semi-annual report revealed that in the first half of 2024, the company invested more than 40 million yuan in R&D, accounting for 4.63% of revenue. The company continues to upgrade the product process platform, forming a healthy development model of “construction-derivative-upgrade”. As the semiconductor power device design company with the largest production volume of IGBT and MOSFET chips on 8-inch and 12-inch process platforms in China, the company has built an advanced power module production line, fully realized industrial chain collaboration, demonstrated strong import substitution advantages in terms of product parameter performance, and realized import substitution for high-end products such as MOSFETs and IGBTs. The ultra-low characteristic on-resistance and high-reliability N-channel 150V third-generation SGT MOS platform, which has reached industry-leading levels, has achieved mass production.

Investment advice:

We expect the company's revenue from 2024 to 2026 to be 1.887 billion yuan, 2.346 billion yuan, and 2.92 billion yuan, respectively, and net profit to mother of 0.454 billion yuan, 0.576 billion yuan, and 0.732 billion yuan respectively. We will be given 33 times PE for 24 years, corresponding to a target price of 36.1 yuan for six months, maintaining a “buy-A” investment rating.

Risk warning:

Industry demand falls short of expectations; new product development and introduction falls short of expectations; market competition intensifies.