Core views

The company released its 2024 semi-annual report, with revenue of 3.609 billion yuan, up 21.69% year on year; net profit to mother was 0.517 billion yuan, up 53.88% year on year; net profit after deducting non-return to mother was 0.473 billion yuan, up 71.87% year on year. Thanks to the recovery in demand in the consumer and Netcom markets, as well as the company's market-share centered business strategy, the company's revenue improved markedly year-on-year and month-on-month in the first half of the year. As downstream demand picks up and product prices bottom up, the company's performance is expected to improve significantly in 2024. The company is a leading international NOR Flash and domestic MCU. It is also expected to gain a leading position in niche DRAM in the future, so it is recommended to focus on it.

occurrences

The company released its 2024 semi-annual report, with revenue of 3.609 billion yuan, up 21.69% year on year; net profit to mother was 0.517 billion yuan, up 53.88% year on year; net profit after deducting non-return to mother was 0.473 billion yuan, up 71.87% year on year.

Brief review

Q2 saw strong year-over-month growth and a steady recovery in profitability. The company's Q2 revenue in a single quarter was 1.982 billion yuan, up 21.99% year on year, up 21.78% month on month; net profit to mother was 0.312 billion yuan, up 67.95% year on year, up 52.46% month on month; net profit without return to mother was 0.29 billion yuan, up 99.25% year on year, up 57.66% month on month. Q2 The gross margin for the single quarter was 38.15%, which was basically the same as the previous quarter. The main reasons for the improvement in performance were: (1) consumption and Netcom market demand picked up in the first half of the year; (2) the company focused on market share to promote product sales and revenue growth.

Flash and MCU inventory levels are healthy, and demand is slowly recovering. 1. Storage: Flash inventory levels are healthy, consumer demand recovered in the first half of the year, industrial demand bottomed out, and industry prices rebounded in the first half of the year. The company's memory gross margin in the first half of the year was 39.24%, up 6.25 pcts month-on-month, mainly due to inventory impairment, resale, and cost reduction. The second half of the year is the peak consumer electronics season, and the company's downstream demand is strongly supported. 2. MCU: Stable consumer and industrial demand and stable prices. The automotive-grade MCU product matrix continues to be enriched. There are 10 models in 4 packages, which can be used in various scenarios such as body control, vehicle lighting, smart cockpit, assisted driving, and motor power supply.

DRAM launched DDR3L and DDR4 and achieved good revenue. In 2019-2021, the company's growth was mainly due to demand for NOR Flash driven by wearables such as TWS, as well as domestic replacement in the context of MCU material expansion and industry shortages. Looking ahead, DRAM will become a new growth point for the company. The company is actively entering the niche DRAM market (consumer, industrial control, etc.), has launched products such as DDR4 and DDR3L, achieved good revenue in the fields of consumer electronics (set-top boxes, televisions, smart homes, etc.), industry, network communication, etc., and continues to promote other self-developed products in the plan.

Profit forecast: The estimated net profit for 2024-2025 is 1.136 billion yuan and 1.876 billion yuan, respectively, and the corresponding PE is 43x and 26x, respectively.

Risk analysis

1. Demand falls short of expected risk. The company's downstream mainly consumer electronics. If downstream demand for headsets, displays, sweepers, and home appliances falls short of expectations, the company's shipment growth falls short of expectations. 2. The client's inventory removal fell short of expectations. Some of the company's products are used in the industrial automobile sector, and the industrial automobile sector is still being de-inventoried. If inventory removal falls short of expectations, product shipments and prices will continue to be under pressure. 3. R&D progress falls short of expectations. The company's vehicle standard MCU, DDR4 8Gb, LPDDR4, PMU, vehicle regulation MCU and other products are under development. If development progress falls short of expectations, there is a risk of losing potential customer orders and shares.