Shannon Xinchuang disclosed the “Proposal on Daily Sex-related Transactions Expected in 2024”. Shannon Xinchuang anticipates that the total daily related transactions between the company and its subsidiaries and related parties, Wuxi Xinheng and Wuxi Xinyang, will not exceed US$622.27 million in 2024 (tax included. On March 11, 2024, the China Foreign Exchange Trading Center was authorized to announce the central price of RMB 1 to RMB 7.0969, converted to RMB 7.0969, or RMB 4416.188 million). Among them, it is estimated that the tax-inclusive amount of the company and subsidiary's transactions with Wuxi Xinheng will not exceed 222.27 million US dollars, and the tax-inclusive amount for education related to Wuxi Xinyang will not exceed 400 million US dollars. In 2024, within an amount not exceeding US$622.27 million (tax included), the daily related transactions carried out by the company and its holding subsidiaries with Wuxi Xinheng and Wuxi Xinyang may transfer the relevant related transaction amounts within the relevant transaction category according to the actual situation. The specific transaction amount and details are subject to the actual contract signed. Compared to 2023, the company and its subsidiaries did not have daily related transactions with Wuxi Xinheng, Wuxi Xinyang and their related parties. In terms of equity structure, in the equity structure of Wuxi Xinheng, Wuxi Gaofa Investment and Development Group holds 40% of the shares of Wuxi Xinheng and Wuxi Xinyang respectively, while Wuxi Taihu International Science and Technology Park Investment and Development Co., Ltd. and Wuxi Chuangyuan Asset Management Co., Ltd. each hold 30% of the shares of the two companies. Among them, Wuxi Hi-Tech Investment is the controlling shareholder of the Wuxi High-tech Zone New Kinetic Energy Industry Development Fund, a shareholder holding more than 5% of Shannon Xinchuang's shares.
The local government in Wuxi has entered the market and is optimistic about the company's long-term development. On January 12, 2024, Wuxi New Kinetics Fund and Shenzhen Linghui Cornerstone signed a “Share Transfer Agreement”. Linghui Cornerstone plans to transfer 23,793,420 shares of listed companies to New Kinetic Energy Fund. On January 16, 2024, Lingchi Cornerstone plans to transfer 22,878,290 shares of Shannon Xinchuang unlimited tradable shares (accounting for 5.00% of the company's total share capital) to Xinlianpu through an agreed transfer; in addition, Linghui Cornerstone and Hongwei Cornerstone (representing “Huaying Fund”) plan to transfer 16,660,880 unrestricted tradable shares (accounting for 3.64% of the company's total share capital) and 6,217,410 shares (accounting for 1.36% of the company's total share capital) to Xinlianpu (representing “Huaying Fund”) through an agreed transfer, respectively (representing “Huaying Fund”). It accounts for 5.00 of the company's total share capital %). On March 1, 2024, the transfer registration procedures for the New Kinetic Energy Fund and Xinlianpu were completed. This equity transfer will further optimize the company's equity structure, and also reflect the local government's recognition of the company's business and confidence in the company's future development. After the transfer of this agreement was completed, Xinlianpu held 5.0% of the company's shares and became a shareholder holding more than 5% of the company's shares. Xinlianpu and its co-chairman, Huang Zewei, the company's director and co-chairman, will hold a total of 10.05% of the company's total share capital, and the core management is deeply tied to the company.
The storage cycle has bottomed out, and enterprise-grade SSDs have a large domestic alternative space to two-wheel drive. On the one hand, Shannon Xinchuang, as the original distributor of core storage in China, is expected to fully benefit from the upward industry cycle and the shortage of high-end storage brought about by AI. On the other hand, the company is a shareholder in Haipu Storage, which focuses on the R&D, production and sales of enterprise-grade storage products. The products cover enterprise-grade NVMe SSDs and RDIMMs. The aim is to provide high-performance and high-reliability storage solutions for servers and data centers, and accelerate the process of replacing domestic enterprise storage.
We expect Shannon Xinchuang to achieve revenue of 117.4/175.6/20.81 billion yuan and net profit to mother of 3.5/58/ 750 million yuan in 2023/2024/2025, respectively, maintaining the “Highly Recommended” rating.
Risk warning: Risk of gross margin fluctuation due to price fluctuations of IC products such as memory, risk of supplier dependency, risk of international trade disputes.