Incident: On October 29, Star Semiconductor released its 2024 three-quarter report. The company achieved total revenue of 2.415 billion yuan in the first three quarters, a year-on-year decrease of 7.80%, and realized net profit of 0.423 billion yuan to mother, a year-on-year decrease of 35.69%.

Increased market competition is dragging down performance, and a recovery in the economy is expected to recover steadily. The company achieved revenue of 0.881 billion yuan in the third quarter, up 21.01% month-on-month, down 5.30%; realized net profit to mother of 0.149 billion yuan, an increase of 33.03% month-on-month, and a year-on-year decrease of 34.91%. The main reasons for the year-on-year decline in the company's operating income are a year-on-year decrease in revenue due to a large drop in the price of some products, a year-on-year decline in gross margin, and a year-on-year increase in the company's R&D investment rate. Looking forward to the future, we believe that the company's performance is expected to recover steadily as the industry recovers.

A number of products are being launched at an accelerated pace, and the NEV business continues to grow. In the first half of 2024, the company began batch loading of 750V automotive-grade IGBT modules based on seventh-generation micro-groove TrenchFieldStop technology on the basis of mass loading in 2023; the company began batch loading of 1200V automotive-grade IGBT modules based on seventh-generation micro-groove TrenchField Stop technology, and also added new main motor controller project targets for several 800V system models. In the first half of 2024, the company's SiC MOSFET modules began to be delivered in large quantities in domestic and foreign NEV markets. At the same time, the company's automotive-grade IGBT modules continued to be delivered in large quantities in countries and regions such as Europe, India, North America, etc. on the basis of batch loading in 2023, and maintained a rapid growth trend. In the first half of 2024, the company's own automotive-grade SiCMOSFET chips (produced through OEM production and self-built 6-inch SiC chip production line) continued to be loaded in batches, and are expected to be rapidly deployed in the future. Successful mass production of automotive-grade SiC MOSFET chips on the company's self-built production line will provide a strong guarantee for the company's 2024-2030 sales growth of automotive-grade SiC MOSFET modules for main controllers.

Customers are progressing actively, and the power generation and energy storage industry has a steady advantage. In the first half of 2024, the company's IGBT modules based on seventh-generation micro-groove Trench Field Stop technology began mass application in the latest generation of 320KW string photovoltaic inverters, and the market share will increase rapidly in the future; the company's IGBT modules for industrial and commercial photovoltaics based on seventh-generation micro-groove Trench Field Stop technology were successfully developed and verified by customers and began mass use; the company's IGBT based on seventh-generation micro-groove Trench Field Stop technology Discrete devices have passed tests in the household optical storage and industrial and commercial optical storage markets and are expected to be rapidly released in the future. Together with the company's string module solutions and centralized module solutions, they will provide customers with a one-stop complete solution, and continue to consolidate the company's leading edge in the photovoltaic industry.

Investment advice: We are optimistic that the company's new energy vehicle business will be driven by downstream demand and will continue to grow. It is expected that in 24/25/26, the company will achieve net profit of 0.616/0.886/1.147 billion yuan, corresponding to the current PE price of 37/26/20 times, respectively, to maintain the “recommended” rating.

Risk warning: Terminal demand falls short of expectations, customer certification falls short of expectations, product development falls short of expectations.