Key points of investment:

2024 Interim Report: 2024H1 Jiang Bolong's revenue was 9.04 billion yuan, YoY +143.8%; gross profit margin of 23.5%, YoY+22.7pcts; net profit without return to mother 0.539 billion; net profit to mother 0.594 billion. 24H1 employee incentive shares paid about 0.146 billion yuan, Q1/Q2 was 0.083/0.063 billion yuan; R&D expenses in the first half of the year were 0.475 billion yuan, an increase of 92.51% over the previous year.

2024Q2 revenue increased slightly month-on-month. 2Q24 revenue 4.59 billion yuan, YoY +106.1%, QoQ +3.0%; gross profit margin 22.65%; net profit to mother 0.21 billion, QoQ -45.3%. 1Q24's revenue was 4.453 billion yuan, up 200.54% year on year; gross profit margin was 24.4%; net profit to mother was second only to profit for the 2021 Q2 quarter, with a quarterly net profit margin of 8.6%.

Since 2023H2, the global semiconductor storage market has been in the upward cycle of the industry, and growth has slowed during the 24Q2 storage supply and demand game period. According to TrendForce, the NAND Flash 24Q1/24Q2 price indices were 23-28%/15-20%, respectively, and 24Q3 prices are expected to continue to rise 5-10%. Storage spot price trends are slowing down at a high level due to the weakness of the consumer market.

Jiang Bolong has two major storage brands, industry-class storage FORESEE and international high-end consumer Lexar, leading the market share of many storage products. According to Omdia data, in 2021, Lexar memory cards ranked second in global market share and Lexar flash drives ranked third in global market share. According to TrendForce's 2021 ranking of global SSD module companies' private brand channel market shipments, the Lexar brand ranked fourth in the world in terms of shipment volume in this market. According to the CFM flash memory market, the company ranked 6th in the world for eMMC & UFS market share in 2022. In 2023, Jiang Bolong's embedded storage accounted for 44% of revenue, solid-state drives accounted for 28%, mobile storage accounted for 23%, memory stick products accounted for 5%, and other products accounted for 0.6%.

All four types of storage products have expanded from consumer-level to enterprise-grade and automotive-grade storage. According to the 2016 mid-year report, the company's enterprise storage business revenue was 0.291 billion yuan, an increase of more than 2000% over the previous year. Automobiles are becoming more intelligent, bringing opportunities for automotive-grade storage.

According to Gartner, global ADAS consumption of NAND Flash storage is expected to reach 4.15 billion GB by 2024. Jiang Bolong's more powerful automotive-grade UFS will replace eMMC and become a forward-looking choice for car manufacturers.

Accelerate self-developed SLC/MLC NAND Flash and build a core barrier. Shipments of SLC NAND chips exceeded 10 million units in 2023, and the first self-developed 32Gb MLC NAND chip was successfully released in 2024.

The main control chip has been shipped in excess of 10 million units. According to the 2023 annual report, Jiang Bolong began mass production of the main control product LS600/LS500, which supports high-end eMMC and memory cards. The 2024 interim report revealed that the number of self-developed main control chips used has exceeded 10 million.

Vertically integrated test equipment and encapsulation production capacity. In terms of business model, Jiang Bolong focuses on the R&D, design and brand operation of semiconductor storage products, including firmware algorithm development, system-level integrated package design (SiP), memory chip test algorithms, and storage application technology development. In 2023, Jiang Bolong acquired Yuancheng Suzhou, Zilia Brazil (Zilia), and Zhongshan Phase II to build self-sufficient manufacturing capabilities.

Maintain profit forecasts and maintain a “buy” rating. The 2024 interim report is in line with expectations, maintaining the 2024-2026 net profit forecast of 1.584/0.985/1.378 billion yuan, 2025/26 PE 30/21X, and maintaining the “buy” rating.

Risk warning: 1) risk of supplier concentration; 2) risk of wafer and product price fluctuations; 3) risk of technology iteration