Release 2024 equity incentives to fully motivate employees and demonstrate confidence. On June 13, 2024, the company announced the 2024 Restricted Stock Incentive Plan (draft). The incentive form is Class II restricted stocks. The number of restricted shares to be granted to the incentive target is 0.95 million shares, accounting for about 0.21% of the company's total share capital. This award is a one-time grant with no reserved benefits. A total of 439 people were involved in this incentive plan. They were the company's core key personnel, and the award price was 55.52 yuan/share. The company-level performance assessment goals are: the first vesting period, based on operating income in 2023, with an operating income growth rate of not less than 11% in 2024; the second vesting period, based on revenue in 2023, with a revenue growth rate of not less than 25% in 2025.

Launch Jinghong series of products and continue to deploy AI. On March 12, 2024, the company disclosed the “Voluntary Disclosure Notice on the Company's New Product Development Progress”. The company successfully developed the Jinghong series of high-performance intelligent computing modules and complete machine products for application fields such as AI training, AI inference, scientific computing, etc., and will promote them to the market as soon as possible. The Jinghong series supports mixed precision computation such as INT8, FP16, FP32, FP64, etc., supports new multi-card interconnection technology to expand computing power, adapts to mainstream CPU, operating systems and server vendors at home and abroad, and can support current mainstream computing ecosystems, deep learning frameworks and algorithm model libraries, greatly shortening the user adaptation verification cycle. This Jinghong series will help enrich the company's high-performance intelligent computing product line for the computing field and expand the company's market business in application fields such as AI reasoning, AI training, and scientific computing.

The first quarter of 2024 saw high performance growth. In 2023, the company achieved revenue of 713 million yuan, a year-on-year decrease of 38%; net profit to mother was 60 million yuan, a year-on-year decrease of 79%. In the first quarter of 2024, the company achieved revenue of 108 million yuan, an increase of 66% over the previous year; net profit to mother was -12 million yuan, an increase of 84% over the previous year.

Profit forecasts and investment recommendations. Affected by the macro environment, customers' ability to pay has declined, and demand has moved backwards.

We believe that the company will unswervingly invest in GPU research and development, make every effort to promote the development strategy from “dedicated” to “specialized+universal”, aim at the application direction of GPUs in the field of artificial intelligence, continue to develop products such as high-performance GPUs, modules, and complete machines, and continuously improve competitiveness. As 2024-2025 enters the last two years of the 14th Five-Year Plan, we expect demand from the military downstream and Xinchuang downstream to gradually improve, driving the growth rate of the company's related business. In 2024-2026, revenue growth rates for products in the graphic display control field were 50%, 20%, and 20%, respectively; revenue growth rates for products in the field of small specialized radars were 80%, 40%, and 30%, respectively; and revenue growth rates for other main businesses were 135%, 50%, and 30%, respectively. We estimate that the company's revenue for 2024-2026 will be 1.209/1.58/1.971 billion yuan (original forecast for 24 was 3.39 billion yuan), net profit to mother of 0.225/0.336/0.471 billion yuan (original forecast for 24 years was 0.84 billion yuan), EPS of 0.49/0.73/1.03 yuan (original forecast of 2.79 yuan for 24), and SPS of 2.64/3.45/ 4.30 yuan, 40 times the 2024 PS, and the target price is 105.41 yuan (originally 112.72 yuan, equivalent to 75.14 yuan after the 1.5-for-1 stock split, +40%), giving it a “better than the market” rating.

Risk warning. The company's business progress falls short of expectations, and industry policy risks.