occurrences

The company announced its 2024 semi-annual results. In the first half of the year, the company achieved operating income of 2.285 billion yuan, +37.20% year over year; net profit to mother of 0.354 billion yuan, -3.32% year over year; and basic earnings per share of 0.66 yuan/share.

The module is growing rapidly, and R&D investment is increasing

Relying on the orderly mass production and characteristic processes of Xinzhuo's semiconductor industrialization project, the company's filter module products entered the harvest period. The company's RF module achieved revenue of 0.966 billion yuan, an increase of 81.41% over the previous year, accounting for 42.29%.

The company's profitability declined in the first half of the year, mainly due to increased competition in the industry and increased cost-side investment.

2024H1's gross profit margin and net margin were 42.12% and 15.46% respectively, -6.94 pct and -6.53 pct, respectively.

In terms of the cost ratio, the cost rate during 2024H1 was 26.61%, +7.11pct; the sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 1.06%, 3.68%, 21.58%, and 0.30%, respectively, +0.09pct, -0.74pct, +6.34pct, and +1.42pct, year-on-year, respectively.

The advantages of production line platforms are prominent, and the focus is on developing the high-end market

The product category of the 6-inch filter production line has achieved a comprehensive layout, with large-scale mass production capacity for discrete devices such as duplexer/quadrature and single-chip multi-band filters. At the same time, products such as DiFeM, L-DiFem, and GPS modules that integrate self-produced filters have been successfully introduced to many brand customers and continue to be released. The company's 12-inch IPD platform has officially entered large-scale mass production, and the proportion of L-pamif, LFEM and other related module products using self-produced IPD filters has reached a high level. In addition, the company is building high-end advanced module technology capabilities to achieve better performance and area advantages through 3D stacked packaging. The product has already entered the verification stage.

Profit Forecasts, Valuations, and Ratings

Due to the downturn in the RF front-end industry, we expect the company's 2024-2026 revenue to be 5.076/6.022/7.053 billion yuan, respectively, up 15.95%/18.63%/17.12% year on year; net profit to mother will be 0.819/1.131/1.447 billion yuan, with year-on-year growth rates of -26.98%/38.03%/27.92%, respectively, and a 3-year CAGR of 8.84%; EPS will be 1.53/2.12/2.71 respectively Yuan/share, corresponding PE is 41x/30x/23x, respectively. Since the company is a leading domestic RF front-end company and the proportion of modules is gradually increasing, it maintains a “buy” rating.

Risk warning: the risk that downstream demand recovery falls short of expectations; the risk that module product development falls short of expectations; the progress of Xinzhuo Semiconductor's industrialization project falls short of expectations.