Matters:

The company announced its 2024 semi-annual report. The report shows that the company achieved operating income of 1.576 billion yuan, an increase of 37.27% year on year; realized net profit of 0.179 billion yuan, an increase of 99.31% year on year; realized net profit deducted from mother 0.158 billion yuan, an increase of 223.43% year on year.

Ping An's point of view:

The company is benefiting from the general recovery of semiconductors, and revenue continues to grow at a relatively rapid pace. As a leading enterprise in the domestic analog integrated circuit design industry, the company has a comprehensive analog and analog and digital hybrid integrated circuit product matrix. The products cover the two major fields of signal chain and power management, and there are more than 5,200 products available for sale in 32 categories. The company is benefiting from this round of semiconductor recovery.

In the first half of 2024, the company's revenue increased by 37.27%, and the growth rate was corrected compared to the same period last year. On a quarterly basis, Q1 and Q2 achieved revenue of 0.729 billion and 847 million yuan respectively, up 42.0% and 33.4% year over year. By product, power management remained the most important source of revenue growth in the first half of the year. Power management and signal chain products achieved revenue of 1,038 billion yuan and 538 million yuan respectively, up 46.30% and 22.66% year-on-year.

Gross margin improved, and period expenses were better controlled, and profits grew rapidly. In the first half of the year, the company's gross margin was 52.33%, up 0.82 percentage points from the same period last year. In the same period, the company's expenses accounted for 35.84% of revenue, down 4.98 percentage points from the same period last year; R&D expenses accounted for 26.49% of revenue, down 3.90 percentage points from the same period of the previous year; sales expenses accounted for 7.41% of revenue, down 0.83 percentage points from the same period last year; and management expenses accounted for 3.26% of revenue, down 0.51 percentage points from the same period last year. In the first half of the year, the company's net profit to mother was 0.179 billion yuan, a sharp increase of 99.31% over the previous year. On a quarterly basis, net profit for Q1 and Q2 was 0.54 million yuan and 124 million yuan, respectively, up 80.04% and 109.10% year over year.

The company's R&D projects are progressing smoothly, and the new products and key tracks have performed well. In the first half of 2024, the company launched a dual-channel 2A flash LED driver, a high-side current detection operational amplifier with a common mode input voltage range of 24V to 105V, a 6A high-efficiency synchronous step-down power conversion chip with fast load transient response capability based on the self-developed AHP-COT architecture, a synchronous step-down chip with fast transient response capability to input 23V and output 8A, automotive-grade synchronous step-down chips, low power consumption, low voltage difference, low noise vehicle-grade LDO chips, etc. At the same time, the company continues to track market developments and changes, especially in application fields such as new energy vehicles, photovoltaic energy storage, artificial intelligence, intelligent manufacturing, etc., and actively lays out and reserves related technologies, intellectual property rights and products. It has now achieved good sales performance in the fields of electric vehicles, industrial control, 5G communications, the Internet of Things, smart homes, wearable devices, drones, and intelligent manufacturing.

Investment advice: The company is a leading domestic analog chip manufacturer. It has comprehensive product deployment in the two main sectors of power management and signal chain, and the number of products that can be sold is at the forefront of the country. In the first half of the year, benefiting from the recovery of the domestic semiconductor market, especially the power management market, the company's revenue and profit maintained a relatively rapid growth trend. Judging from the trend, apart from traditional racetracks, the company's product layout and market development in new fields such as electric vehicles and industrial control are relatively smooth, and the positive trend will continue. Based on the company's financial report for the first half of the year and industry trends, we adjusted the company's profit forecast. In 2024-2026, the company is expected to achieve net profit of 0.48 billion yuan (previous value was 0.465 billion yuan), 0.674 billion yuan (previous value was 0.662 billion yuan), and 950 million yuan (previous value was 0.916 billion yuan). EPS was 1.02 yuan, 1.43 yuan, and 2.01 yuan, respectively. The PE corresponding to the closing price on August 30 was 71.5X, 50.9X and 36.1X. We expect that the company's strong products and market capabilities will bring good performance, and that the company's valuation premium as a market-leading enterprise will also be reflected, maintaining the “recommended” rating for the company.

Risk warning: 1) Market growth falls short of expectations. 2) Increased market competition. 3) Risk of loss of personnel.