Event: The company released its 2024 semi-annual report. The company achieved revenue of 3.609 billion yuan in the first half of 2024, up 21.69% year on year, and achieved net profit of 0.517 billion yuan, up 53.88% year on year; corresponding to the second quarter of 2024, achieved revenue of 1.982 billion yuan, +21.78% year on month, and achieved net profit of 0.312 billion yuan corresponding to 24Q2, +67.95% year on year and +52.46% month on month.

Comment:

Downstream demand picked up, and the company achieved a significant increase in performance in the first half of 2024. According to the company's semi-annual report, the company's current products are mainly divided into memory products, microcontroller products, and sensor products. During the reporting period, the global semiconductor industry showed a recovery trend, driven by demand such as AI servers. In terms of storage, 1) On the DRAM side, improvements in the supply and demand pattern in the first half of 2024 drove up the price of niche products. From the supply side, overseas original manufacturers are gradually increasing their investment in high-end products such as HBM and DDR5, corresponding to a decrease in supply in categories such as DDR4 and DDR3, and niche DRAM showed an overall contraction in supply; on the demand side, mainly in consumer electronics and other fields; 2) On the NOR Flash side, Mordor Intelligence estimates that the global market size in 2024 will reach 3.6 billion US dollars, with an average yearly compound The growth rate is 6%; in terms of MCU, the Yole research report shows that the global MCU market size in 2023 is about 22.9 billion US dollars, and the average compound annual growth rate is expected to be 5.3% in 2028, and the market size will reach 32 billion US dollars in 2028. WSTS expects the global MCU market to grow moderately this year and next two years, with growth rates of 1.6% and 5.2%, respectively. Benefiting from the recovery in downstream demand, the company achieved significant year-on-year increases in revenue and net profit to mother in the first half of 2024, and 24Q2 revenue and net profit to mother increased year-on-year and month-on-month.

During the reporting period, many of the company's businesses progressed smoothly, and the product structure was continuously upgraded. The company adheres to the combined layout of multiple racetracks and multiple product lines. Currently, the memory business can be divided into SPI NOR, SLC NAND and DRAM. Microcontrollers include ARM cores and RISC-V open source cores, sensors include touch and fingerprint recognition chips, and expand from the consumer market to industrial control and automobile markets, continuously opening up new profit growth points. In terms of storage, the company continues to maintain technology and market leadership in NOR Flash, providing various series of products such as high capacity, high performance, high reliability, high safety, low power consumption, low voltage, and small package for different application market requirements. In automotive applications, the company's GD25 products fully meet the automotive-grade AEC-Q100 certification, and GD55's 2Gb high-capacity products have also passed this certification; in terms of MCU, as the leading manufacturer of 32bit MCU products in China, the company's GD32MCU products have successfully mass-produced 51 products The series and more than 600 MCU products have achieved comprehensive coverage of high-performance, mainstream, entry-level, low-power, wireless, vehicle regulations, and special products; in terms of sensors, the company's touch chips support ITO large impedance, single-layer multi-point, and ultra-narrow bezel functions, and are widely used in OGS touch screens. Fingerprint recognition chips have been commercialized in many flagship/high/mid-range smartphones for many years, and have become mainstream market solutions. In the first half of 2024, benefiting from a recovery in downstream demand, the company's Flash products saw new growth in the consumer and Netcom markets, and the expansion effect of its own DRAM products was obvious. The MCU product matrix was further enriched, driving the company's profitability to rise somewhat. Specifically, the company's gross sales margin for the first half of 2024 was 38.16%, +4.72pct, and the net sales margin for the first half of 2024 was 14.33%, +3.00pct, 24Q2 gross sales margin was 38.15%, +8.70pct, and 24Q2 net sales margin was 15.75%, +4.31pct, and +3.17pct month-on-month.

The actual controller of the company proposed to repurchase shares, demonstrating confidence in continued future development. On August 21, the company issued an announcement stating that Mr. Zhu Yiming, the controlling shareholder, actual controller, and chairman of the company, proposed to use the company's own funds to repurchase 0.15 billion yuan to 0.2 billion yuan of shares, with the repurchase amount exceeding 120 yuan/share, and not higher than 150% of the average trading price of the company's shares in the 30 trading days before the board of directors passed the share repurchase decision. All of the repurchased shares will be used to cancel and reduce registered capital. Based on the company's current total share capital of 665,872,205 shares, calculated according to the minimum repurchase amount of RMB 0.15 billion and the maximum repurchase price of 120 yuan/share, the proposed repurchase amount is about 1.25 million shares, accounting for 0.19% of the company's current total share capital; based on the maximum repurchase amount of RMB 0.2 billion and the maximum repurchase price of 120 yuan/share, the number of shares to be repurchased is approximately 1.6667 million shares, accounting for approximately 1.6667 million shares of the company's current total share capital 0.25% The company said that on the one hand, this share repurchase enhances investors' confidence in the company and helps protect the interests of investors. On the other hand, it also shows Mr. Zhu Yiming's confidence in the company's continued development and recognition of its long-term value.

Investment advice: The company's product line covers various fields such as storage, MCU, sensors, etc., and continues to benefit from the recovery in downstream demand and the improvement of the product matrix, and is expected to achieve double growth in shipment volume and revenue. The company's earnings per share for 2024-2025 are expected to be 1.62 yuan and 2.61 yuan, respectively, and the corresponding PE is 46 times and 28 times, respectively.

Risk warning: Risk of downstream demand recovery falling short of expectations, risk of product development falling short of expectations.