Incident: The company released its 2024 mid-year report. 2024H1 achieved revenue of 2.285 billion yuan, a year-on-year increase of 37.20%; realized net profit due to mother 0.354 billion yuan, a year-on-year decrease of 3.32%; and realized net profit deducted from non-mother 0.354 billion yuan, a year-on-year decrease of 3.43%.

The cyclical trend of RF front-end changes has weakened, and sales of RF modules have brought in new volume. Affected by macroeconomic factors such as international geopolitical conflicts, slowing economic growth, and fierce market competition, the global and even domestic semiconductor markets are under great pressure. The RF front-end chip segment where the company is located is also affected by the general environment, and the cyclical trend of change is weakening. During the reporting period, the company increased its marketing efforts for filter module products and gradually increased the penetration rate and market share of high-performance products in brand clients. The share of RF module sales climbed to 42.29%, the highest ratio in history, and there is still room for continued growth in the future.

Pay attention to product technology iteration and continue to increase investment in R&D. In the rapidly evolving and ever-changing semiconductor industry, technological innovation is the key for the company to maintain long-term competitiveness. During the reporting period, the company invested 492.9701 million yuan in R&D, an increase of 94.22% over the previous year. R&D expenditure accounted for 21.58% of revenue, up from 6.34% in the same period last year. Increasing investment in R&D is not only a need for the company to pursue technological progress, but also a strategic choice to ensure the company's leading position in the fierce market competition.

The resource platform has significant advantages, and the high-end market continues to gain strength. Relying on self-built production lines, the company continues to expand in terms of characteristic processes, materials, technology, differentiation, etc.: The product category of the 1.6 inch filter production line has achieved a comprehensive layout, and has large-scale mass production capacity for discrete devices such as duplexer/quadruplex 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. As of 24H1, the 6-inch filter wafer production line has actually shipped more than 0.1 million pieces since mass production on a stable scale. Furthermore, the company's R&D for LPAMid products covers the full spectrum, and will gradually enrich product models, continue to lay out a high-value product matrix, and form a closed loop of product strategy. 2. 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.

Investment advice

We expect the company to achieve revenue of 5.073, 6.234, and 7.019 billion yuan in 2024-26, and net profit to mother of 0.932, 1.187, and 1.446 billion yuan, corresponding to PE 60.57, 47.55, and 39.03x. This is covered for the first time, giving it a “buy” rating.

Risk warning: downstream demand falls short of expectations; industry competition increases risk; new product introduction falls short of expected risk