Revenue increased month-on-month in the second quarter, and losses narrowed. In the first half of 2024, the company achieved revenue of 0.751 billion yuan (YoY +15.60%), net profit to mother of 0.337 billion yuan, net profit less than 0.36 billion yuan, increasing the year-on-year loss margin; gross margin decreased 3.8 pct to 27.79% year on year, R&D expenses increased 31% year on year to 0.321 billion yuan, and R&D rate increased 5.1 pct to 42.71% year on year. Among them, 2Q24 achieved revenue of 0.421 billion yuan (YoY +21%, QoQ +28%), a quarterly high, net profit to mother of 0.128 billion yuan, after deducting net profit of non-return to mother of 0.147 billion yuan, and the loss margin narrowed year-on-month; gross margin was 27.87% (YoY-2.7pct, QoQ +0.2pct). As of mid-2024, the company had 635 R&D personnel, an increase of 91 from 544 at the end of 2023.

Power management chip revenue increased 17.85% in the first half of the year, with battery management chips more than doubling.

In the first half of the year, the company's power management chip revenue was 0.738 billion yuan (YoY +17.85%), accounting for 98.3%, gross margin was 27.68%, of which DC-DC chip revenue was 0.369 billion yuan (YoY +0.55%), accounting for 49%, gross profit margin 25.24%; AC-DC chip revenue was 0.227 billion yuan (YoY +36.27%), accounting for 30%, gross profit margin 24.51%; linear power chip revenue 0.12 billion yuan (YoY +43.65%), accounting for 16%, gross profit margin 40.58%; battery management chip revenue 22.45 million yuan (YoY +135%), accounting for 3%, gross profit margin 30.62%.

Signal Chain chip revenue was 6.89 million yuan (YoY +13.86%), accounting for 0.9%, with a gross profit margin of 20.61%.

Launched a variety of new products for emerging markets, while actively developing epitaxial development. In the first half of the year, the company released various products such as high-integration DC-DC modules, step-down DC-DC modules, amplifiers, comparators, analog switches, etc., which were recognized by customers in the field of new energy and automobiles; in the electronic protection switch category, the company launched a variety of integrated power tube products, which were well received by customers in the field of computing; in the field of Netcom and security, the company launched a variety of PoE Ethernet power supply chips, including highly integrated 4-channel PSE power supply chips, PD receiving terminal protocols and fully integrated power chips. In addition, the company has launched a variety of high and low side driver chips for automotive applications, and has basically completed the layout of automotive LDO. Furthermore, the company adopted an active epitaxial development strategy. In the first half of the year, Wuxi Yixin Company, Aixinze, and Zhejiang Xinta were successively included in the scope of consolidated statements, further enhancing the company's competitiveness through complementary advantages.

Investment advice: Our own process platform helps launch high-end analog chips and maintain the “better than the market” rating. Due to high R&D investment, we lowered the company's 2024-2026 net profit to -3.10/+0.003/0.104 billion yuan (previous value was -2.30/+0.019/0.111 billion yuan), and PS corresponding to the stock price on August 30, 2024 was 3.9/3.1/2.6x, respectively. The company uses a virtual IDM business model. Although short-term profits are under pressure, it is optimistic about the support of its own process platform in the field of high-end analog chips in the long term and maintains a “superior to the market” rating.

Risk warning: demand falls short of expectations, product development falls short of expectations, and customer introduction falls short of expectations.