Q3 interconnect chip revenue continues to hit record highs in a single quarter. 1) 24Q1-Q3: Revenue 2.57 billion yuan, yoy +69%, net profit to mother 0.98 billion yuan, yoy +318%, deducting non-0.87 billion yuan, yoy +461%, non-recurring profit and loss 0.1 billion yuan, gross profit margin 58%, yoy 2pcts, net profit margin 38%, yoy+23pcts, net profit margin 34%, yoy+24pcts. The share payment fee was 0.036 billion yuan, which affected the net profit attributable to mother of 0.031 billion yuan. 2) 24Q3: Revenue 0.91 billion yuan, yoy +52%, qoq -2%, net profit to mother 0.385 billion yuan, yoy +153%, qoq +4%, minus non-0.33 billion yuan, yoy +117%, qoq +2%. 59% gross profit margin, yoy-6pcts, qoq+1pcts, net profit margin 42%, yoy+17pcts, qoq+2pcts, minus non-net interest rate 36%, yoy+11pcts, qoq+1pcts. 3) Revenue composition: 24Q3 interconnect chips/Jinjiao server CPU revenue accounted for 94%/6%, including interconnect chip revenue of 0.849 billion yuan, yoy +46%, and qoq +2%, setting a record high in revenue in a single quarter, with a gross margin of 62% and qoq-2pcts.

Q3 DDR5 accounts for more than 50% of shipments, and we continue to monitor the progress of subsequent child iterations. 24Q3 DDR5 memory interface chip shipments surpass DDR4. Judging from child generation iterations, Lanqi 24H1 second generation RCD shipments exceed the first generation, and the share of the second child generation is expected to continue to increase. The third generation is expected to begin large-scale shipments of 24H2 (Intel's third-generation CPU platform Sierra Forest was released in June 2024). We expect the company's DDR5 RCD gross margin to be relatively stable as the higher unit price of the third generation and the share of the second child generation continues to increase.

PCIe Retimer shipments continue to double, and MRCD/MDB and CKD are expected to increase in size in 25 years. 1) PCIe 5.0 Retimer: Driven by PCIe 5.0 Retimer shipments, the revenue of the three new 24Q3 products increased slightly month-on-month, Q3PCIe 5.0 Retimer shipped more than 0.6 million units (24Q2 shipped 0.3 million+, 24Q1 shipped 0.15 million +), and the company's PCIe5.0 Retimer product Serdes was self-developed, which has obvious advantages. Continue to follow the company's expansion progress with overseas customers . In terms of PCIe 6.0, the company expects to complete the flow sheet and sample preparation of PCIe 6.0 Retimer chip engineering samples within the year. 2) MRCD/MDB, CKD: The Intel CPU platform Granite Rapids, which supports the first generation of MRDIMM, was released in September 24, and the Intel CPU platform Arrow Lake, which supports CKD, was released in October. This year, MRCD/MDB and CKD are mainly trial requirements. With the promotion of CPU platforms, we expect MRCD/MDB and CKD to increase on a larger scale in 25 years. 3) CXL MXC chip: The company launched the world's first CXL MXC chip in May 2022, leading the world in technology. It became the world's first MXC chip manufacturer to enter the CXL compliance supplier list in 2023. Currently, some server manufacturers have launched prototypes with memory expansion and memory pooling. According to the system architecture of related prototypes, a server for memory pooling can be equipped with 16 CXL MXCs. It is expected that the company's products will increase in volume in the future.

A new product line of clock chips opens up the 3 billion dollar market.

A clock chip is a chip that provides the necessary clock pulse for an electronic system. It mainly includes a clock generator chip, a clock buffer chip, and a clock de-jitter chip. According to MarketDataForeCast, the global clock chip market was $2.03 billion in 2022 and is expected to reach $3.02 billion in 2027. 24H1 has completed the development of a mass production version of the clock generator chip. It is currently in the pre-production preparation stage. It mainly targets applications such as storage, computing power chips, switches, etc., and has also officially started research and development of clock buffer chips.

Investment advice: The company is a global leader in memory interface chips. DDR5 accelerates penetration, and new products such as MRCD\ MDB\ CKD\ PCIe 5.0 Retimer\ MXC chips\ clock chips open up room for growth. The net profit for 24-26 was previously estimated to be 1.5/2.5/3.1 billion yuan. Considering that some of Intel's new CPU platforms have yet to increase in scale, the net profit to mother for 24-26 was adjusted to 1.3/2/2.6 billion yuan. The corresponding PE valuation was 57/37/30 times, maintaining the “buy” rating? Risk warning events: Server and PC shipments fall short of expectations; risk that the penetration rate of MRDIMM, CUDIMM, CSODIMM, and PCI5.0 Retimer falls short of expectations; risk that the underlying information is lagging behind, etc.