Incident The company released the 2024 semi-annual report. The company achieved revenue of 1.665 billion yuan, +79.49% year over year, and achieved net profit of 0.593 billion yuan to mother, +624.63% year over year. The performance grew rapidly, and the overall performance was in line with expectations.

Gross margin has been rising steadily, and the effect of scale is gradually showing. Judging from the company's 24Q2 revenue level, 24Q2 revenue was 0.928 billion yuan, +83% YoY, +26% month-on-month, net profit 0.37 billion yuan, +495% YoY, +66% month-on-month; net profit without return to mother 0.325 billion yuan, +9133% YoY, +48% month-on-month, a record high for the single quarter. Judging from the business split, the company's 24H1 interconnect chip achieved revenue of 1.528 billion yuan, or 67.89% year-on-year, and gross margin of 62.43%. The server platform's revenue was 0.13 billion yuan, +846% year-on-year, and gross margin was 3.87%. Among them, 24Q2, interconnect chips generated revenue of 0.833 billion yuan in the second quarter, +67.3% year over year, and +19.92% month-on-month, setting a record high for this product line in a single quarter. The increase in DDR5 penetration rate mainly drove revenue growth for memory interfaces and module supporting chips. The company's 24H1 comprehensive gross margin was 57.78%, +1.5pct year over year, of which 24Q2 gross margin was 57.83%, +0.1pct month-on-month, and gross margin remained stable. 24H1's net interest rate was 35.63%, +26.8pct year on year. Profitability improvement was mainly due to a decrease in the cost ratio during the period. 24H1 company's R&D expenses increased 21% year on year to 0.367 billion yuan, and the R&D cost ratio was 22%, -10.6 pct year on year. The scale effect gradually became apparent.

Connected chips hit a record high in a single quarter, promoting iterative research and development of new products. The company's 24Q2 traditional memory interface and supporting chips increased steadily. PCIe Retimer's share of AI server projects in mainstream cloud factories continued to increase, and shipments doubled to 0.3 million units month-on-month. MRCD/MDB-related terminal products began large-scale trials in mainstream cloud computing vendors, generating 50 million in revenue. CKD chips were not sold, revenue volume exceeded 10 million, and overall connectivity chip revenue hit a record high in a single quarter. At the same time, the company released DDR5 fourth-generation RCD chips, developed DDR5 fifth-generation RCD chips and second-generation MRCD/MDB chips, and promoted the engineering research and development of PCIe 6.0 Retimer chips. The company released the 6th generation Tsu in June '24? CPU officially released another new product in the same month, namely data protection and trusted computing acceleration chips. Multiple businesses go hand in hand to look forward to the company's future growth.

Investment advice: The company is a leading global manufacturer of memory interface chips. We believe that with the gradual release of the company's new products, it will continue to break through the overall ceiling of the company's market and be optimistic about the company's development in the long term. We expect the company's net profit to be 1.436/2.3/2.834 billion yuan in 2024-2026, respectively, and the corresponding PE is 40.54x/25.30x/20.54x, maintaining the “recommended” rating.

Risk warning: the risk of increased competition in the industry; the risk of new product development and promotion falling short of expectations; the risk of the international macro environment and regulation.