Investment Highlights:

Third Quarterly Report: The revenue in the first three quarters was 2.479 billion yuan, YOY +3.70%, the net profit attributable to the parent company was -536 million yuan, YOY -352.40%, and the net profit not attributable to the parent company was -645 million yuan.

24Q3 single-quarter revenue was 909 million yuan, yoy +11.4%, gross profit margin -5.22%, net profit attributable to the parent company -148 million yuan, yoy -687.94%, net profit not attributable to the parent company -216 million yuan. In 2024Q3, the global semiconductor market continued to recover, with wafer shipments increasing year-on-year, with shipment area Qoq +6% and yoy +7%. In terms of products, the growth of wafer shipments mainly came from 300mm wafers, with a shipment area of QoQ +8% and YOY +13%; Demand for wafers of 200mm and below remains sluggish. The

construction project of 12-inch silicon wafers is advancing rapidly, with sales volume of 2.94 million pieces in 2023 (yoy -3%), and the monthly production capacity will be expanded to 500,000 pieces in January 2024. In 2023, Shanghai Xinsheng, a subsidiary of Shanghai Xinsheng, will ship more than 10 million 300mm semiconductor silicon wafers, becoming the largest mass-produced 300mm semiconductor silicon wafer positive product in China, and achieving full coverage of logic, memory, image sensor (CIS) and other applications. In 2024H1, the company's total production capacity of 300mm semiconductor silicon wafers has reached 500,000 pieces/month, and the second phase of the new project can be completed by the end of the year, with a production capacity of 600,000 pieces/month; The total production capacity of the subsidiaries Xinao Technology and Okmetic 200mm and below polished wafers and epitaxial wafers exceeds 500,000 pieces/month; The total production capacity of SOI wafers of 200mm and below exceeds 65,000 pieces per month. The subsidiary, Xinao Xinyi, has also built a 300mm high-end silicon-based material test line with a production capacity of about 60,000 pieces/year. The

sales volume of 200mm and below silicon wafers in 2023 will be 3.52 million pieces (yoy -24%), and the subsidiaries Xinao Technology, Okmetic, and New Silicon Polymerization will deploy new products and new production capacity. The subsidiary, Xinao Technology, continued to promote the R&D pilot project of 300mm high-end silicon-based materials; In terms of epitaxial business, following the strong market demand for electric vehicles and industrial products, Xinao Technology has carried out all-round cooperation with customers to actively explore the application market of IGBT/FRD products, and has achieved a good market share. Okmetic, a subsidiary of Finland, has launched a 200mm specialty wafer expansion project in Vantaa, Finland, to further expand the production capacity of 200mm polished wafers for sensors and RF applications, and strengthen its market position in high-end fields such as advanced sensors, power devices, RF filters and integrated passives. The subsidiary, New Silicon Polymerization, has completed the construction of a pilot line for piezoelectric thin film material substrates, and some of its products have been verified by customers.

Lowered earnings forecasts and maintained "overweight" ratings. As the demand for 8-inch wafers is still sluggish, the 2024-26 revenue forecast has been lowered from 40/50/7 billion yuan to 35/43/6.2 billion yuan, and the net profit attributable to the parent company has been lowered from 1.4/2.7/430 million yuan to 0.3/2.0/230 million yuan. The current share price corresponds to 2024 PS 17X, which is 7% lower than the 2024 average PS 18X of semiconductor material comparables (Tianyue Advanced, Longtu Mask), and maintains an overweight rating.

Risk Warning: 1) Risk of exchange gains and losses. 2) The progress of new energy vehicles is not as expected. 3) The risk of loss in the LED business.