Matters:

On August 23, 2024, the company released its 2024 semi-annual report:

1) 2024H1: The company achieved operating income of 0.304 billion yuan, +0.72% year over year, gross profit margin of 25.02%, +1.14pct year on year; net profit attributed/withheld from mother -0.011/-0.027 billion yuan, -903.45%/-51.09% year on year;

2) 2024Q2: The company achieved operating income of 0.168 billion yuan, -0.66%/+24.03%; gross profit margin of 23.75%, year-on-year/month-on-month -1.25pct/ -2.84pct; net profit attributed/deducted from mother -0.011/-0.019 billion yuan.

Commentary:

24Q2 revenue increased month-on-month, and the recovery in demand combined with the release of new products is expected to drive the company's performance to gradually recover. Demand in some downstream markets picked up in the first half of 2024. The company continued to broaden its product matrix and expand market share and product introduction. 2024H1 achieved revenue of 0.304 billion yuan, +0.72% over the same period last year. Although demand in the LED lighting market is sluggish, it has benefited from high demand for home appliances exports. At the same time, the company achieved a landmark share breakthrough in the air conditioning sector, driving the company's overall revenue +24.03% month-on-month in 2024Q2. The company continues to increase R&D investment and market development efforts. Net profit did not reach the same period last year due to increased operating expenses. R&D expenses in the first half of 2024 were +22.64% year-on-year, providing a solid guarantee for long-term development. Looking forward to the future, as the industry cycle recovers and the company continues to release new products, it is expected to drive a gradual recovery in performance.

The recovery in terminal demand is imminent, and domestic substitution is accelerating, and local PMIC manufacturers are expected to continue to benefit.

Currently, the domestic LED driver, DDIC and other industries have reached the end of the inventory phase, and the release of new products such as mobile phones and PCs is expected to gradually pick up demand for related pan-consumer chips. Referring to the current state of the industry cycle, we believe that the semiconductor industry boom cycle has begun to recover. In terms of the competitive landscape, at present, the localization rate of power management chips in China is still low. In the context of the last round of core shortages combined with domestic substitution, domestic manufacturers such as Biyi Wei have gradually risen in some segmented tracks. At present, the company has become an advantageous supplier in the driver IC and AC/DC markets. At the same time, the company is actively expanding battery management chip products and developing a signal chain business. In the future, the company is expected to achieve a further increase in revenue volume and market share in the process of recovering demand and promoting domestic substitution.

The company maintains a high level of investment in R&D and broadens the product layout to open up room for growth. The company's endogenous extension expands product categories and application areas. 2024H1's R&D investment accounted for +4.99pct of revenue to 27.91% year-on-year. On the AC/DC side, the company is actively promoting the localization process of high-power fast charging (up to 240W) and high-power power supply (up to 3000W) applications; on the DC/DC side, the company actively carries out research and development of high-current products above 8A and high-voltage products above 60V. Among them, CMCOT architecture DC-DC products with 100V high voltage resistance have been introduced to customers and tested; in terms of motor drives, the company has completed a new layout of the motor drive business in Chengdu through the acquisition of Dongxin Micro. It has launched a variety of products; in terms of signal chains, the company has sent samples of a variety of high-voltage high-precision, dual-voltage products Channel high voltage operational amplifier.

Investment suggestions: Demand for terminals is gradually picking up, domestic substitution is accelerating, and the company continues to broaden its product layout to open up room for long-term growth. Considering the degree of recovery in downstream demand, we lowered the company's 2024-2026 net profit forecast from 0.024/0.055/0.095 billion yuan to 0.009/0.045/0.081 billion yuan, corresponding EPS of 0.13/0.65/1.17 yuan, maintaining the “recommended” rating.

Risk warning: demand recovery falls short of expectations; industry competition intensifies; new product development progress falls short of expectations.