Core views

Affected by increased competition in 8-inch foundry prices and a slowdown in customer demand in the product and service sector, the company's net profit in 2024 was under pressure. As the first phase of the company's new 12-inch production line finishes climbing in the second half of 2024, the second phase will also reach production by the end of 2025, which is expected to drive the company's overall revenue back into an upward trend. The company achieved a breakthrough in the high-end silicon light processing platform and made key progress in the SiN silicon light process platform. It successfully developed 5 new products and successfully moved into mass production. The monthly production capacity reached 1000 tablets, and the product yield was as high as 95%, achieving stable supply. The first coverage gives an “gain” rating.

occurrences

The company released its 2024 mid-year report. The first half of this year achieved revenue of 0.617 billion yuan, a year-on-year decrease of 43%. Among them, Q2 revenue for the single quarter was 0.308 billion yuan, down 46% year on year, down 0.42% month-on-month, 1H24 net profit loss of 0.015 billion yuan, net profit loss of 0.074 billion yuan after deducting non-return net profit loss of 0.074 billion yuan.

Brief review

The 8-inch foundry price war dragged down a sharp decline in revenue and gross margin in the manufacturing and service sector

The company's manufacturing and service sector achieved revenue of 0.28 billion yuan in the first half of this year, a year-on-year decrease of 23.45%. Since the first half of 2024, the consumer market has gradually picked up, order demand has increased slightly, and shipments have remained stable, but the average product price still declined sharply, which dragged down the company's manufacturing business revenue. The 8-inch wafer production line in the industry has developed a lot of new production capacity in the past few years. Due to low demand for downstream terminals and fierce price competition in the industry, the company's overall gross margin fell to 6.15% from 25.24% in the previous quarter due to the continued decline in 8-inch foundry prices.

The 12-inch new production line has contributed to growth momentum. High-density power device platform development has been completed. The company currently has 6-inch and 8-inch silicon-based production lines. The 12-inch production line, which is the key layout of the fund-raising project, will enter the production capacity climbing stage one after another. According to the investment plan, the 0.04 million monthly production capacity will be built in two phases. The first phase of 0.02 million chip production capacity is mainly based on high-density power platforms. The process platforms that have already been connected include: high-density power devices TMBS and Trench MOS products. We expect the company to have high-density power devices by the end of this year After completing the first phase of production capacity, the new 12-inch production line will ship 0.08 million tablets in the second half of the year. The second phase of the new production capacity is expected to gradually complete the decline in production capacity by the end of 2025. The second phase of the production line focuses on the DDIC high-pressure process platform. The planned production capacity is 0.02 million pieces. After the 12-inch production line is put into operation, it will become a new growth engine for the company.

Demand for the product and solution business slowed in the first half of the year. The silicon light process platform achieved a major breakthrough. The company's sales revenue in the product and solution sector reached 0.305 billion yuan, a year-on-year decrease of 55.06%. Mainly affected by objective factors, customer demand in the specialty integrated circuit sector slowed down, leading to a significant decline in revenue in the product and solution sector. The company actively responds to market changes, increases research and development of new products, expands new products and customers, strengthens technical and resource reserves, and prepares production for market recovery. The company is deeply involved in the field of special integrated circuits. The silicon light platform has made great progress in the 8-inch production line and the 12-inch production line respectively. Among them, the 8-inch SiN process platform has achieved mass production, the 8-inch SOI process platform has completed the development of some key devices, and the 12-inch SOI process platform has completed the development of some key processes, and the monthly production capacity has reached 4000 pieces. It is expected to deliver more than 5,000 pieces to customers during the year

Investment advice: The company's revenue for 2024-2026 is expected to be 1.737 billion, 2.732 billion, and 37.69 billion yuan, respectively, up -18.3%, 57.3% and 37.9%, respectively. Net profit to mother is 0.077 billion, 0.328 billion, and 598 million yuan, respectively, with year-on-year growth rates of -83.0%, 326.9%, and 82.5%, respectively.

The first coverage gives an “gain” rating.

Risk warning: 1) Risk of the impact of cyclical fluctuations in the industry on business performance: The company's business terminal applications are mainly in the consumer electronics sector. The recovery in downstream demand shows a “W” recovery, and industry fluctuations increase, which may adversely affect the company's performance. 2) As the competitive pattern in the industry continues to deteriorate, the sales price of the company's products continues to decline, sales volume declines, and profits fall short of expectations. 3) There is a risk that the 12-inch new production line will be delayed. The company's important growth momentum in 2025 and 2026 was contributed by the volume of the 12-inch production line. If the new product climbs less than expected, it may cause revenue to fall short of expectations.