occurrences

The company released its 2024 semi-annual report, and achieved operating income of 5.274 billion yuan in the first half of the year, +17.83%; net profit to mother -0.025 billion yuan, narrowing year-on-year losses; in a single quarter, 2024Q2 achieved operating income of 2.809 billion yuan, +13.95% month-on-month; and net profit to mother of 0.01 billion yuan.

Key points of investment

Downstream market demand recovered, and revenue continued to grow month-on-month. In the first half of 2024, the overall recovery trend of the downstream market continued. The company achieved operating income of 5.274 billion yuan, +17.83%; gross profit margin of 19.90%, down 4.3% year on year; net profit to mother of -0.025 billion yuan, narrowing year on year; in a single quarter, 2024Q2 achieved operating income of 2.809 billion yuan, +13.95% month on month; gross profit margin of 17.96%, down 4.14% month on month; net profit to mother - 0.01 billion yuan, loss Mainly due to negative net income from fair value changes in other illiquid financial assets held, falling product gross margin due to increased market competition, depreciation of fixed assets in production lines and continuous growth in R&D investment. The scale effect brought about by revenue growth offset some of the losses, so overall company losses narrowed in the first half of the year. As the scale of subsequent revenue continues to expand, it is expected to turn a loss into a profit.

Integrated circuits are growing strongly, and the share of IPM continues to rise. The company's 2024H1 integrated circuit's revenue was 2.035 billion yuan, an increase of about 29% over the same period last year. Among them, many mainstream domestic white electric machine manufacturers used more than 83 million units in white electric machines such as inverter air conditioners, and the operating income reached 1.413 billion yuan, an increase of about 50% year on year. IPM revenue is expected to grow rapidly; MEMS sensor shipments increased by about 8% year on year, but due to price declines, 24H1's revenue was 0.115 One billion yuan, a year-on-year decline; 32-bit MCU circuit products continued to maintain a relatively rapid growth trend, and revenue increased by about 28% year on year. In the future, MCU will provide one-stop services for white power and industrial customers along with the company's rich products such as power devices and IPM modules.

SiC production capacity is climbing one after another, and the third-generation SiC MOS is progressing smoothly. The operating revenue of 2024H1's discrete device products was 2.399 billion yuan, up about 4% year on year; of these, IGBT and SiC (modules, devices) revenue reached 0.783 billion yuan, an increase of more than 30% year on year. At present, Silamine Gallium has developed a monthly production capacity of 6,000 6-inch SiC MOS chips. The production capacity is expected to reach 9,000 pieces/month by the end of the third quarter, and the production capacity will reach 12,000 pieces/month by the end of 2024. The second-generation SiC MOS main drive module independently developed by the company has been verified by customers such as Geely and Huichuan, and mass production and delivery have begun. The development of the third-generation plane-grid SiC MOS technology has been initially completed and will soon be introduced into mass production.

Investment advice:

We expect the company's 2024-2026 net profit to be 0.08/0.49/0.73 billion yuan, maintaining a “buy” rating.

Risk warning:

Downstream market demand fell short of expectations; gross margin declined due to increased competition in the industry; shipments of silicon carbide modules fell short of expectations.