Incident: Zhaoyi Innovation issued an announcement. The company reviewed and passed the “Proposal on Increasing the Implementing Entities and Locations of the DRAM Fund-raising Project and Using Part of the Raised Capital to Increase Capital to the Wholly-owned Subsidiary and the Wholly-Owned Sun Company”, and the four wholly-owned Sun companies Beijing Xincun, Shanghai Xincun, Hefei Xincun, and Xi'an Xincun were the implementing entities of the “DRAM Chip R&D and Industrialization Project”, and the company would use a portion of the raised capital of 800 million yuan to increase the capital to Zhuhai Hengqin Core Savings. Using raised funds to Beijing Chip Storage, Shanghai Chip Storage, Hefei Chip Storage, and Xi'an Chip Storage increased their capital by 10 million yuan, 10 million yuan, 20 million yuan, and 50 million yuan respectively to implement the fund-raising project, corresponding to the increase in implementation locations in Zhuhai City, Beijing's Chaoyang District, Hefei City, and Xi'an City.

Increase the allocation of DRAM business resources. The new fund-raising project implementation entity and location were used to increase capital for wholly-owned subsidiaries and wholly-owned subsidiary companies, which is conducive to optimizing and adjusting the company's internal resource allocation and improving the company's project management and overall operating efficiency. As an important part of the Guangdong-Hong Kong-Macao Greater Bay Area, the Hengqin Guangdong-Macao Greater Bay Area enjoys unique institutional advantages and a good business environment, which can bring good development opportunities to the company and provide more convenience for the development of the company's DRAM overseas sales business.

Therefore, increasing the number of implementing entities and locations for fund-raising projects will help the company make effective use of location advantages, integrate business and R&D resources, and further guarantee the smooth implementation of fund-raising investment projects.

The DRAM business is progressing rapidly, and a second growth curve has opened. The company's self-developed DRAM products include DDR3L and DDR4. DDR3L products provide 1Gb/2Gb/4Gb capacity common to the market; DDR4 8Gb products have been successfully distributed and samples have been provided to customers, providing a wide range of application options for the market with 4Gb/8Gb capacity. Niche DDR3L is one of the most widely used DRAM system solutions in the fields of network communication, television, set-top boxes, industry, smart homes, etc.; Niche DDR4 is an ideal choice for many fields such as set-top boxes, televisions, network communications, smart homes, and automotive AV systems. 24H1's self-developed DRAM market expansion results are obvious, and the total number of customers sold has further increased. According to the announcement, 24H1's DRAM business and Hefei Changxin's related transaction amount is about 0.45 billion yuan, and the estimated annual related transaction amount is about 0.852 billion yuan, +135.4% over the same period last year. The DRAM business has begun to be realized at an accelerated pace.

Profit forecast and investment suggestions: The announcement added new implementing entities and locations for fund-raising projects and increased capital for subsidiaries and subsidiary companies, indicating that the company is devoting resources to increase DRAM product development and market development efforts, promote DRAM business volume and share expansion, and accelerate the second growth curve. The company is expected to achieve net profit of 1.24/2.02/2.56 billion yuan in 2024/2025/2026, with corresponding PE valuations of 36.4/22.3/17.6x respectively, maintaining a “highly recommended” rating.

Risk warning: Downstream demand falls short of expectations, industry competition intensifies, and R&D progress falls short of expectations.