Core view

The company released the 2024 performance forecast, with revenue of about 3.639 billion yuan in 2024, a year-on-year increase of about 59.20%, and a net profit attributable to the parent company of 1.378-1.438 billion yuan, a year-on-year increase of 205.62%-218.93%. The company's revenue in 24Q3 maintained a high water mark, net profit hit a record high, and continued to benefit from the DDR5 upgrade cycle of servers and PCs, and shipments of DDR5-related products continued to grow quarter-on-quarter in 24Q4, with a record revenue and profit in a single quarter. In terms of AI, retimer shipments continue to grow rapidly, and the market share has increased significantly, MRCD/MDB, CXL, CKD is expected to increase in 2025, and the three chips of AI transportation capacity are building a new growth curve. It is recommended to focus on it.

Event

The company released the 2024 performance forecast: 1) the revenue in 2024 will be about 3.639 billion yuan, a year-on-year increase of about 59.20%; the net profit attributable to the parent company was 1.378-1.438 billion yuan, a year-on-year increase of 205.62%-218.93%; The net profit deducted from non-attributable to the parent company was 1.224-1.284 billion yuan, a year-on-year increase of 230.82%-247.04%. 2) Q4 achieved revenue of 1.068 billion yuan, a year-on-year increase of 40.34%, and net profit attributable to the parent company of 400-460 million yuan, a year-on-year increase of 84.33%-111.98%.

Brief comment

The company's operating performance in 2024 will increase significantly year-on-year mainly because: 1) benefiting from the gradual recovery of demand in the global server and computer industry, the company's demand for memory interface and module supporting chips has achieved restorative growth, and at the same time, benefiting from the improvement of DDR5 downstream penetration rate and the continuous iteration of the subgeneration, the company's DDR5 memory interface chip shipments have exceeded DDR4 memory interface chips, and the shipments of DDR5 second-generation memory interface chips have exceeded the first-generation memory interface chips; 2) Benefiting from the trend of the AI industry, the company's three new high-performance capacity chips (PCIe Ret imer, MRCD/MDB, CKD chips) began to be shipped on a large scale, contributing new performance growth points to the company.

Memory interface chips: Server procurement demand remained strong, and DDR5 shipments grew further. The penetration rate of DDR5 on the server side further increased, and the company's RCD and supporting chip shipments grew steadily month-on-month, accounting for more than 50% of DDR5 shipments in 24Q3, driving revenue and profit growth month-on-month. At present, the company's DDR5 second generation RCD shipments exceed the first generation, and the third generation will begin to ship on a large scale, which is expected to boost the unit price and gross profit margin of products. The memory interface CKD for AI PCs has been shipped in 24Q2, and with the release of Intel's new generation of PC processors, CKD is expected to be shipped on a large scale in 2025, increasing revenue and profits.

AI capacity chips: Large-scale shipments of new products to build a new growth curve. In the first half of the year, the revenue of the three AI transportation capacity chips grew rapidly in 24H1, with a single-quarter revenue of 130 million yuan in Q2, more than doubling month-on-month, and the revenue of H2 temporarily decreased due to the large-scale trial of the client. 1) PCIe retimer: Benefiting from the rapid growth of demand for AI servers, the company's PCIe retimer 5.0 has doubled quarter-on-quarter, with shipments of 150,000 units and 300,000 units from 24Q1 to Q2, and continued to double in Q3 with shipments reaching more than 600,000 units. The introduction of overseas customers has entered the final stage, and it is expected to increase in 2025. 2) MRCD/MDB: It has started large-scale trials with mainstream cloud computing/Internet vendors at home and abroad, and is on the eve of large-scale production. 3) CXL MXC: In May 2023, Samsung launched the first 128GB dram with CXL2.0 support, equipped with the company's MXC products, and the CXL ecosystem is gradually improving, and the company is in a leading position.

Earnings Forecast and Valuation: The company has survived the difficult period of industry destocking in 23H1, and the fundamentals have rebounded strongly since 23H2, and the revenue and net profit of memory interface chips in 24Q3 have reached a record high, and will continue to benefit from the DDR5 upgrade cycle of servers and PCs. In terms of AI, ret imer began to ship on a large scale, and its market share increased significantly, MRCD/MDB, CXL are on the eve of increasing volume, and the three chips of AI transportation capacity have built a new growth curve. It is estimated that the net profit attributable to the parent company from 2024 to 2026 will be 1.400 billion yuan, 1.968 billion yuan, and 2.514 billion yuan respectively, corresponding to PE 56x, 40x, and 31x, which is recommended to be focused on.

Risk analysis

1. DDR5 penetration is less than expected. At present, the server and PC industries are in the stage of replenishing inventory, DDR5 still has a premium over DDR4, and customers' purchasing willingness is uncertain.

2. The research and development of new products is less than expected. The company is promoting the research and development of DDR5 successor RCD, DDR5 second generation MRCD/MDB, CXL MXC and other products. There are many new products developed and technical barriers are high, and there is a risk that the research and development is less than expected; 3. Geopolitical risks. The company's main direct customers are DRAM module manufacturers, indirect customers and partners are server manufacturers and CPU manufacturers, and most of the manufacturers are overseas companies.