The company released its 2024 three-quarter report. Benefiting from factors such as restorative growth in demand for memory interfaces and module supporting chips, increased DDR5 downstream penetration rate, and new product launches, the company's performance increased significantly year-on-year in the first three quarters of 24. Maintain a buy rating.

Key points to support ratings

The recovery in industry demand was compounded by the increase in new products, and the company's performance increased significantly in the first three quarters of 24 years over the same period last year. The company achieved revenue of 2.571 billion yuan in the first three quarters of 24 years, +68.56% year over year, realized net profit to mother of 0.978 billion yuan, +318.42% year over year, and realized net profit without deduction of 0.874 billion yuan, or +460.88% year over year. In terms of profitability, the company achieved a gross profit margin of 58.12% in the first three quarters of 24, -1.53 pcts year on year, achieved a net profit margin of 38.04%, +22.72 pcts year on year, and achieved a net interest rate of 33.99% without return to mother, and +23.77 pcts year on year. Looking at a single quarter, the company achieved revenue of 0.906 billion yuan in 24Q3, +51.6%/-2.35% month-on-month, realized net profit of 0.385 billion yuan, +153.40%/month-on-month +4.10%, and realized net profit without return to mother 0.33 billion yuan, or +116.83% /month-on-month. The company achieved a gross profit margin of 58.74% in 24Q3, -6.06 pcts/month-on-month +0.91 pcts. Furthermore, net profit attributable to mother in 24Q3 excluding share payments was 0.394 billion yuan, +116.62% over the same period last year.

Data center recovery has led to an increase in the resilience of memory interfaces and module supporting chips. In 24Q3, the sales revenue of the company's interconnect chip product line was 0.849 billion yuan, +46.02% year-on-year, and +1.83% month-on-month, setting a record high in sales revenue for the product line in a single quarter, with a gross margin of 62.21%. Among them, shipments of DDR5 memory interface chips in a single quarter surpassed DDR4 memory interface chips, benefiting from the gradual recovery in demand in the global server and computer industry, the increase in DDR5 downstream penetration rate and continuous iteration of children. The company's demand for memory interface and module supporting chips achieved restorative growth, and shipments of DDR5 second-generation memory interface chips surpassed that of first-generation products.

Benefiting from AI industry trends, the company's chips continue to expand their horizons. In terms of new products, in 2024, the company's three new high-performance capacity chip products (PCIe Retimer, MRCD/MDB, CKD chips) began large-scale shipments, contributing new performance growth points to the company. Among them, PCIe Retimer chip shipments in the third quarter exceeded 0.6 million units, driving a slight month-on-month increase in the total sales revenue of the company's three new high-performance capacity chip products.

valuations

Considering the continued increase in DDR5 penetration rate and the increasing demand for connected products in the AI era, the company is expected to be driven by multi-dimensional growth. However, due to the strong cyclical nature of the storage industry and the risk of falling short of expectations, we adjusted the company's profit forecast. The company is expected to achieve revenue of 3.808/5.53/7.132 billion yuan in 2024/2025/2026, respectively, and realized net profit of 1.334/2.123/2.725 billion yuan, respectively, and EPS was 1.17/ 1.86/2.39 yuan, corresponding to 2024-2026 PE is 59.1/37.2/29.0 times, respectively. Maintain a buy rating.

The main risks faced by ratings

The recovery of the storage market falls short of expectations, the rate of increase in DDR5 penetration is slowing down, new product development falls short of expectations, and the international environment is unstable.