The company's net profit after deduction for 23 years increased 67% year-on-year, putting short-term pressure on profitability in the first quarter. Benefiting from increased demand for new energy, the company achieved revenue of 1.5 billion yuan (YoY +62.5%), net profit to mother of 120 million yuan (YoY +47.6%), net profit after deducting 100 million yuan (YoY +66.9%), and a gross profit margin of 22.2% (YoY+1.3pct) in 23 years. Entering 1Q24, due to weak PV demand and price adjustments for automotive products, etc., the company's 1Q24 revenue was 246 million yuan (YoY -25.59%, QoQ -33.3%), net profit to mother of 0.2 billion yuan (YoY -105.6%, QoQ -105.6%), net profit after deducting non-attributable net profit of 0.05 billion yuan (YoY -118.5%, QoQ -127.9%), gross profit margin 15.9% (YoY-3.6pct, QoQ-8.7pct), and short-term profitability was under pressure.

Chip technology continues to break through, and the abundance of module products is increasing. The company maintains a high level of R&D investment (R&D cost rate of 7.18% in 23 years). In terms of chip technology, 750V IGBT and FRD chips have completed vehicle certification, 12-inch 1200V M7i chips for industrial control and photovoltaics have been verified, and self-developed SiC SBD samples have been sent. In terms of module technology, the company's 400A/650V three-level customized modules for photovoltaics have been delivered in batches, 400-800A/750V double-sided cooling modules for vehicles have entered the mass supply stage, and UPS customized SiC hybrid modules have been introduced in batches. Since modular product customization has a certain degree of customer stickiness, the company's customer stickiness is expected to further increase as the company's module product matrix gradually becomes richer.

Established Core Kinetic Energy Semiconductors, leading the layout of plastic modules. The company and Changzhou Science and Technology Innovation Fund jointly established the “Core Kinetic Energy Semiconductor” company to focus on the development of advanced module packaging technology. The project plans an annual production capacity of 7.2 million units, mainly focusing on module packaging forms that are gradually penetrating into automotive and other applications: plastic packaging, including double-sided and single-sided heat dissipation forms. At present, the project has completed the installation, commissioning and wiring of the first production line. Tens of thousands of automotive main drive plastic module products have been delivered in batches to customers in 23 years, and it is expected that the shipment will exceed one million in 24 years.

It has covered leading customers in the industry, and is expected to restore profitability as the economy recovers. The company has been deeply involved in the industry for many years and has a good customer base: in the field of industrial control, customers include companies such as Huichuan Technology, Delta Group, Avian, Eaton, etc.; in the field of new energy power generation, customers include leading companies such as Customer A, Sunshine Power, Aisway, Grywatt, and Herowang; in the field of new energy vehicles, customers include companies such as BYD, Huichuan, Zhendrive Technology, etc.; charging pile customers include Infineon, Incuri, Premium Green Energy, Telco, etc. In the future, as demand for photovoltaics gradually picks up, the company is expected to usher in profit-side restoration and improvement.

Investment advice: In the medium to long term, we are optimistic about the company's technical capabilities in chip and module design and process implementation and growth space in the field of new energy applications. In the short term, considering the decline in industry sentiment and the decline in product prices, combined with the company's 23 and 1Q24 operating conditions, the 24-25 gross margin forecast was lowered. The company is expected to achieve net profit of 1.02/1.36/180 million yuan in 24-26 (previous value: 211/291 million yuan in 24-25), corresponding to PE 35/26/20 times in 24-26, maintaining “buying” “Enter” rating.

Risk warning: demand for new energy generation and automobiles falls short of expectations, module production line construction falls short of expectations, etc.