Revenue increased 39% in the first half of the year, and gross margin increased by 3.12 pct. The company released its 2024 semi-annual report, with 1H24 revenue of 0.551 billion yuan (YoY 38.91%). The growth was mainly due to the company's focus on developing the main business MEMS, and the Swedish production line had good order, production and sales conditions, achieving business growth while maintaining good profitability. Net profit attributable to mother - 0.043 billion yuan (loss of 15.23 million yuan compared to the same period of the previous year), net profit not attributable to mother - 0.049 billion yuan (decrease of 13.36 million yuan compared to the same period of the previous year). The gross profit margin was 35.04% (YoY3.12pct), mainly due to the fact that the gross margin of the Swedish production line remained high, and the Beijing production line improved markedly.

Revenue increased 36% in the second quarter, and net profit decreased year-on-year. The company's 2Q24 revenue was 0.281 billion yuan (YoY 36.41%, QoQ 4.17%), net profit to mother -0.031 billion yuan (11.86 million yuan less than the same period of the previous year, 19.35 million yuan higher than the previous quarter), net profit not attributable to mother -0.035 billion yuan (13.96 million yuan less than the same period of the previous year, a loss of 21.17 million yuan compared to the previous quarter), gross profit margin 36.88% (YoY) 8.87pct, QoQ 3.75pct).

The main MEMS industry continues to drive product introduction, and semiconductor equipment still contributes a certain amount of revenue. By business, the company's 1H24 MEMS wafer manufacturing revenue was 0.306 billion yuan (YoY 32.11%), accounting for 55.6%, gross profit margin 34.57% (YoY 2.00pct); MEMS process development revenue was 0.161 billion yuan (YoY 24.32%), accounting for 29.1%, gross profit margin 37.55% (YoY 2.34pct); semiconductor equipment revenue was 0.057 billion yuan, mainly because the wholly-owned subsidiary Saiji International is still developing moderately The semiconductor equipment business contributed a certain amount of revenue to the company, accounting for 10.4% and a gross profit margin of 21.25%.

The Swedish production line is driving the utilization rate of existing production capacity to rise, preparing conditions for increasing overseas production capacity. The 1H24 Swedish production line has a capacity utilization rate of 38.75% and a production yield of 72.78%. Due to business needs, Sweden's FAB1 & FAB2 continues to increase the overall production capacity of existing production lines through the purchase of additional key equipment and the acquisition of semiconductor industrial parks. Since the Swedish production line is still recovering, the revenue share of high-unit price, low-yield wafer products such as MEMS-OCS has increased, and as a result, its capacity utilization rate is still low, and production yield is within a normal range.

The Beijing production line continues to be in a phase of climbing capacity, and the capacity utilization rate has increased significantly. The 1H24 Beijing production line has a capacity utilization rate of 29.42% and a production yield of 77.03%. Since the Beijing production line is still in the phase of climbing capacity, it will still take some time for process development, product verification, and mass production of products to meet customer needs. There are still relatively few categories that have achieved mass production, and most of them are still in the process development, product verification, or risk trial production stage.

Investment advice: Maintain an “better than the market” rating. Considering the company's leading position in the world in Sweden and the large-scale production advantage of the Beijing production line, and the company added semiconductor equipment sales business, and combined with the company's production expansion pace and the actual climbing progress of the Beijing production line, we maintain performance expectations. We expect 2024-2026 operating income of 1.571/2.081/2.543 billion yuan (unadjusted), and net profit to mother of 0.255/0.362/0.533 billion yuan (unadjusted). The PB corresponding to the current stock price is 2.10/1.97/ 1.80, maintaining the “better than the market” rating.

Risk warning: Production capacity release falls short of expectations; customer verification falls short of expectations; downstream demand falls short of expectations.