CRIC's 1H24 revenue increased year over year. Net profit reversed year on year, and Jinghe released its 2024 mid-year report. 1H24 revenue was 4.398 billion yuan, up 48.1% year on year; net profit to mother was 0.187 billion yuan, an increase of 0.231 billion yuan year on year, thus reversing losses. Main reasons: 1) Demand for 1H24 downstream televisions, smartphones and other consumer electronics has maintained a recovery trend, driving the company's DDIC and CIS OEM demand to recover, and the capacity utilization rate is full; 2) The company continues to enrich its product structure to make CIS the second-largest main product, and 1H24's revenue share rapidly increased to 16.0% (6.0% in 2023). We are optimistic that the company's DDIC demand will rise steadily, and platforms such as CIS/PMIC will continue to expand, maintaining the 2024/2025/2026 net profit forecast of 0.591/0.887/1.411 billion yuan. 1.68x 24-year PB (2.1x discount compared to the industry average, mainly due to DDIC price pressure and higher depreciation during the active expansion of production capacity), maintaining the target price of 18.45 yuan and the purchase rating.

2Q24 review: Revenue fluctuated slightly due to sales volume and DDIC price pressure, but Q2 revenue for companies with diversified product structures was 2.17 billion yuan, up 15.4% year over year, but decreased 2.6% month-on-month, mainly due to fluctuations in the company's sales volume and DDIC OEM prices still under pressure due to industry competition. The company has successfully achieved small-batch production of 40nm high-voltage OLED display driver chips in Q2, and the development of the 28nm process platform is progressing steadily. While the company continues to consolidate its DDIC advantage, it also promotes product diversification to enhance competitive advantage. The CIS platform actively cooperates with major customers. Following mass production of 90nm CIS and 55nm stacked CIS, Jinghe announced on April 19 that it has mass-produced 55nm single-chip, high-pixel back-illuminated CIS, making a leap forward towards the middle and high-end of smartphones. The revenue contributions of CIS and PMIC platforms rapidly increased to 16.0%/9.0% in 1H24 (6.0%/6.0% in 2023), respectively.

2H24 outlook: Major CIS customers drive 55nm growth, and focus on 40nm LED driving progress. We believe that demand for 2H24 downstream consumer electronics such as smartphones and PCs will continue to pick up, and the company's capacity utilization rate is expected to continue to be at full production since March, driving the company's sales volume to continue to grow. Due to strong demand for the company's CIS platform, the price increase was carried out in Q2, and combined with the optimization of the company's DDIC product structure, we believe it is expected to help the company achieve a steady upward trend in 2H24 ASP. As a result, we expect the company's performance in the second half of the year to be better than the first half. Recommended attention: 1) Major CIS customers continue to advance into smart phones and other fields, and the company actively cooperates with process platform development and production capacity support, which is expected to benefit. We expect the company's production capacity to grow to 157kwpm (+40k yoy) by the end of 2024, with a focus on 55nm advanced CIS capacity expansion; 2) 2H24's 40nm MolED platform production capacity is progressing.

Maintain target price of $18.45 and “buy” rating

We are optimistic that the diversification of the company's product structure will lay the foundation for medium- to long-term growth. We maintain the 2024/2025/2026 net profit forecast of 0.591/0.887/1.411 billion yuan, corresponding EPS of 0.29/0.44/0.70 yuan. Based on 24E BPS of 10.97 yuan, 1.68x PB was given, maintaining a target price of 18.45 yuan and a “buy” rating.

Risk warning: The semiconductor cycle is declining; OEM competition is intensifying; the risk that process platform development falls short of expectations.