Event: Company releases 2024 mid-year report
1) 24H1: Revenue 2.11 billion yuan, -5.2% YoY; net profit to mother 0.2 billion yuan, -11.1% YoY; net profit without return to mother 0.2 billion yuan, -3.5% YoY. Gross profit margin 37.6%, +1.1 pct year on year; net profit margin 9.4%, -0.3 pct year on year.
2) 24Q2: Revenue of 1.1 billion yuan, -4.6% YoY, +9.2% month-on-month; net profit to mother 0.11 billion yuan, +2.6% YoY, +26.3% month-on-month; net profit without return to mother 0.12 billion yuan, +22.6% YoY, +43.2% month-on-month. Gross profit margin 37.7%, +1.8pct year over month, +0.2pct month-on-month; net profit margin 10.0%, +1.0pct yoy, +1.3pct month-on-month.
24H1 computing chips continue to grow, and memory chips are still under pressure. 24H1's computing chips/memory chips/analog and interconnect chips achieved revenue of 0.52/1.32/0.23 billion yuan, respectively, or +10.6%/-12.3%/+23.4%, accounting for 24.8%/62.5%/11.0% of total revenue; gross margin was 32.6%/35.4%/52.1%, respectively, +9.1/-0.7/-0.4pct.
The new process for memory chips is more cost-effective, and computing chips expand new products & markets. The company continues to promote the development of new DRAM/Flash memory chips. Samples of the first 21nm DRAM product are expected to be released at 24H2. At the same time, it has begun research and development of 20nm DRAM products, and is increasing research and development of high-capacity NOR Flash products. Computing chips launched major chips such as T23, T31, and T41 to meet the market needs of different levels of dual camera products, continue to expand fields such as pan-video, smart home appliances, printers, etc., and strengthen product promotion in overseas markets.
The consumer market is expected to continue to improve, and the industry market is yet to recover. 24H2 is generally the peak season for the consumer electronics market, and demand in the consumer market is expected to continue to improve; the automotive, industrial and other industries are still relatively sluggish, and there is some inventory pressure, but demand is expected to slowly recover as inventories continue to be removed. The 24H2 memory chip business is expected to improve sequentially, and 24Q4 is expected to achieve year-on-year growth.
Investment advice: Considering the slow recovery of the industry-type chip market targeted by the company, we lowered the profit forecast appropriately. We expect the company's net profit to be 0.51/0.64/0.82 billion yuan in 2024-26 (previously 0.65/0.88/1.19 billion yuan), corresponding to PE 43/34/27 times, maintaining a “buy” rating.
Risk warning: The speed of domestic storage replacement falls short of expectations, terminal demand falls short of expectations, and the risk of untimely update of research and usage information data.