Event: on August 30, the company released its mid-2023 report. 1) in the first half of 2023: the income was 649 million yuan,-7.47% compared with the same period last year, and the net profit returned to the mother was-191 million yuan, turning into a loss over the same period last year. 2) 2023Q2: income 348 million yuan, month-on-month + 15.3%, year-on-year-4.6%; gross profit 30.6%, month-on-month-2.2pct, year-on-year-9.4pct; return to the mother net profit of-134 million yuan, year-on-year profit to loss, month-on-month loss expanded, mainly due to asset impairment loss in the second quarter (provision for inventory reduction) increased by 62.76 million yuan compared with the first quarter The inventory at the end of the second quarter was 927 million yuan, an increase of 5.9% compared with the end of the first quarter.

Revenue grew in the second quarter on a month-on-month basis, and weak demand put pressure on profits. In the first half of 2023, the market consumption was weak, the terminal demand was insufficient, and due to the fact that there were more stocks in the industry and terminal market and the demand for digesting their own inventory, the demand for the company's products decreased downstream. In addition, in the first half of the year, the company continued to increase investment in research and development, rising costs, and the decline in gross profit margin of the company's products, resulting in a large decline in net profit compared with the same period last year. In the face of weak overall demand, the company continued to improve its product line and launch new products, and its revenue grew by 15.3% in the second quarter compared with the previous quarter.

The product line is continuously improved, and the product category continues to be rich. The company kept a close eye on the market demand and continued to give full play to its technical advantages. in the first half of the year, clock products and linear product lines were added in the signal chain direction, and the product line was further improved. in terms of the existing product line, the company continued to launch new products and rich material numbers: 1) DC-DC: released a number of step-down products that can be used in automotive electronics, covering 5V, 36V, 60V applications and high-performance computing applications, deepening cooperation with Intel Corp The overall solution of voltage regulator module is introduced. 2) AC-DC: continuously launch new products, including PFC, AHB (international leader), ACF (international leader), ZVS, QR, PSR controller, GaN sealing chip and protocol chip, etc. 3) Linear power supply: a variety of automobile-grade LDO has been developed, which can be used in intelligent cockpit and auxiliary driving. In addition, an industry-leading 18V/50A power tube integrated electronic protection switch (eFuse) was launched in the first half of the year, which has been widely praised by customers in the computing field. 4) BMS: launched 13 series of low system cost analog front-end chips to achieve a good balance between performance and cost, can be used in power tools and two-wheeler market, has been recognized by many customers.

We will continue to maintain high investment in R & D and introduce equity incentives to strengthen the construction of the echelon of talents. In the first half of 2023, the company's R & D expenditure was 240 million yuan, year-on-year + 69.88%, accounting for 37.57% of the company's operating income. by the end of the second quarter, the number of R & D personnel increased to 461, an increase of 35.19% over the same period last year, and R & D technical personnel accounted for 61.30% of the company's total staff. at the same time, the company launched new equity in the first half of the year, and the proportion of employees who had been motivated reached 54.39% by the end of the second quarter. The technical reserve and talent foundation needed for the medium-and long-term development of the company are further consolidated.

Investment suggestion: taking into account the current downward cycle of the semiconductor industry and the tightening domestic competition in simulated IC, the company's short-term performance is under pressure. The company's 2023-2025 net profit is expected to be-2.65,0.62 and 278 million yuan (previously 0.03amp 0.98 amp 2.62), and the closing price on 2023-9-4 is-54,228,51 times PE. After excluding the influence of share payment, the net profit of the company from 2023 to 2025 is expected to be-1.83,1.87 and 344 million yuan respectively, and the PE of the closing price on 2023-9-4 after excluding the influence of shares is-78,76,41 times. Considering the unique position of the company's virtual IDM model in the domestic simulation IC ecology, we are optimistic about the future growth prospects of many new products represented by the company's high current DC-DC and BMS, and maintain the "buy" rating.

Risk tip event: downstream boom repair is not as expected; new product introduction progress is not as expected