Due to weak demand in the automotive/industrial sector, net profit after deducting non-return to mother in Q3 was +2% month-on-month, showing business resilience.

Revenue for the first three quarters of 24 was 3.201 billion yuan, down 6.39% year on year, and net profit due to mother was 0.304 billion yuan, down 17.37% year on year. After deducting net profit of non-return to mother of 0.318 billion yuan, down 8.25% year on year. The year-on-year decline in revenue is mainly due to the fact that market demand in industries such as automobiles and industry is still low.

24Q3 single-quarter revenue was 1.094 billion yuan, down 0.49% month-on-month, net profit 0.107 billion yuan, down 3.00% month-on-month, net profit 0.119 billion yuan, up 1.82% month-on-month; gross profit margin 37.20%, down 0.48pct month-on-month, net profit margin 9.67%, down 0.31pct month-on-month, after deducting non-net profit margin of 10.89%, up 0.25pct month-on-month. The month-on-month decline in net profit due to 24Q3 equity payment expenses was about 0.018 billion yuan. If share payment fees were excluded, 24Q3 net profit to mother was about 0.125 billion yuan, an increase of 4% over the previous month.

The cost-effective T23 hot sales drive Q3 computing chip revenue +3% month-on-month, and storage/simulation is still under pressure.

The largest product, memory chip 24Q3, had revenue of 0.671 billion yuan, a slight decrease of 0.73% from the previous month, accounting for 61.28% of revenue; the gross profit margin was 33.7%, a slight decrease from the previous month. The slight month-on-month decline in revenue was mainly due to the month-on-month decline in DRAM due to a slight month-on-month decline in the US and European automobile markets and weak demand in the industrial market, while revenue from Flash products increased month-on-month, driven by demand for AI servers.

The second-largest product, the 24Q3 computing chip, had revenue of 0.29 billion yuan, up 2.60% month-on-month, accounting for 26.48% of revenue; gross profit margin was 35.1%, down 0.4 pct month-on-month. Although the 24Q3 security monitoring market did not show peak season characteristics, revenue continued to grow month-on-month, and the T23, which has the ultimate cost ratio, became the most sold product.

The third-largest product simulation and connectivity chip 24Q3 had revenue of 0.115 billion yuan, down 8.54% from the previous month, accounting for 10.52% of revenue; gross margin remained high at around 53%. The month-on-month decline in revenue was mainly due to low sentiment in the automotive and industrial markets, and fluctuations in purchases from major customers.

21/20nm DRAM has been introduced one after another, and the mid- and low-end layout of computing chips has been gradually improved, and future growth can be expected.

(1) In terms of memory chips, 21nm DRAM is expected to launch samples at the end of 24, 20nm is expected to provide samples in 25H1 or mid-25, and products below 20nm are expected to be offered to customers at 25H2.

(2) In terms of computing chips, the 24Q3 chip T32 is aimed at the industry-level dual camera product market in the field of security monitoring, and the C200 MPW film for the pan-video field. The performance is in line with expectations. (3) In terms of analog and connected chips, 24Q3 GreenPhy generated a small amount of revenue, and revenue is expected to grow in '25.

The world's leading automotive IC company, has a comprehensive layout of “computing+storage+simulation” and maintains a “gain” rating.

The company is a scarce automotive IC leader in China, with a comprehensive layout of automotive-grade chip platforms. With the collaborative development of the company's various segments, the company's net profit from 2024 to 2026 is expected to be 0.458/0.589/0.725 billion yuan respectively, corresponding to PE 65.0/50.5/41.0 times in 24/25/26, maintaining a “gain” rating.

Risk warning: product development risk; market expansion risk; gross margin decline risk; supplier risk, etc.