Description of the event

On August 20, 2024, GigaYi Innovation announced the “2024 Semi-Annual Report”. 2024H1 achieved revenue of 3.609 billion yuan, +21.69% year over year; net profit to mother 0.517 billion yuan, +53.88% year over year; net profit after deducting non-return to mother 0.473 billion yuan, +71.87% year over year. 2024Q2 achieved revenue of 1.982 billion yuan, +21.99% YoY, +21.78% month-on-month; net profit to mother 0.312 billion yuan, +67.95% YoY, +52.46% month-on-month; net profit without return to mother 0.29 billion yuan, +99.25% YoY and +57.66% month-on-month.

Incident comments

Second-quarter results continued to be delivered. 2024Q2 achieved revenue of 1.982 billion yuan, +21.99% YoY, +21.78% month-on-month; net profit to mother 0.312 billion yuan, +67.95% YoY, +52.46% month-on-month; net profit without return to mother 0.29 billion yuan, +99.25% YoY, +57.66% month-on-month; gross margin of 38.15%, +8.70pct YoY, and -0.01pct month-on-month. Demand picked up, and the company's revenue and profit continued to grow in the second quarter compared to the same period last month.

The 2024H1 has multiple product lines and excellent storage performance. 2024H1 achieved revenue of 3.609 billion yuan, +21.69% year over year; net profit to mother of 0.517 billion yuan, +53.88% year over year; net profit without return to mother of 0.473 billion yuan, +71.87% year over year, gross margin of 38.16%, +4.73 pct year over year; 2024H1 consumption and Netcom market demand recovery + the company's market-share strategy contributed to a definitive increase in performance in the first half of the year. By product line, memory chips, MCUs, and sensors achieved revenue of 2.605, 0.805, and 0.192 billion yuan respectively, or +29.41%, +4.34%, and +8.76% compared to the same period, accounting for 72%, 22%, and 5% of revenue respectively, and gross margins of 39.24%, 38.46%, and 19.95% respectively. The company's product lines have all achieved year-on-year growth, with memory lines growing significantly.

Product strength helps the company continue to consolidate its leading position. Storage line: NOR Flash: second in the world; while maintaining a competitive advantage in the high-end consumer electronics market, the company continues to develop industrial, communications, automotive and other application fields to achieve full coverage in multiple application fields. SLC NAND Flash uses 24nm as the main process node to cover all categories of consumer, industrial, and automotive products. Self-developed DRAM: The company has multiple product models in the DDR3L and DDR4 product lines, which are widely used in the fields of Netcom, TV, set-top boxes, industry, smart homes, etc.; the actual amount of transactions related to Changxin in the first half of the year reached 0.454 billion yuan, accounting for about 53% of the estimated annual transaction volume. MCU: No. 1 in China. The company has successfully mass-produced 51 product lines and over 600 MCUs to achieve comprehensive coverage of high-performance, mainstream, entry-level, low power consumption, wireless, vehicle regulations, and special products.

Leaders are showing off, and growth can be expected. The company NOR Flash continues to expand its business scale and market share. SLC NandFlash has further increased its share of 24nm process nodes, DRAM continues to launch DDR4 8Gb products and develop LPDDR4. MCU is positioned as a “department store” and continues to break through the vehicle and home appliance markets. We are optimistic about the deterministic growth of many products as they continue to be released. Net profit to the mother for 2024-2026 is expected to be 1.125, 1.812, and 2.319 billion yuan, respectively, maintaining the “buy” rating.

Risk warning

1. Downstream demand recovery falls short of the expected risk;

2. The risk of developing new products falling short of expectations due to brain drain.