the demand for trust creation and AI is booming, and the importance of autonomous AI computing power base has been paid attention. In such a market environment, Haiguang Information CPU and GPU new products continue to iterate, for China's independent AI ecology to continue to provide the basis of computing power, new products are expected to help the company's development to a new level. The company's CPU has a smooth replacement advantage, GPU in terms of ecology and performance also has significant advantages, we believe that the company's leading position in the CPU-GPU market is expected to be solid. Taking into account factors such as the pace of the tender, we adjust the 2023-2025 EPS forecast to 0.52/0.74/1.03 yuan, maintaining a "buy" rating.

the two main lines of trust and AI, demand continues to be strong. The long-term demand for Xinchuang is stable. Take the telecommunications industry as an example. In the first quarter of 2023, China Unicom's servers purchased Haiguang servers in a centralized amount of 0.899 billion yuan. In the second quarter, China Mobile Research Institute purchased 4000 domestic confidential servers. Since mid-May, it has issued more than 20 server-related bidding announcements. Referring to the history of the credit industry, we believe that there is some uncertainty in the pace of credit bidding, but the long-term development prospects are still stable and promising. AI demand has formed a market consensus, and Nvidia's second-quarter revenue guidance of $11 billion at the first quarter of 2023 (FY2024Q1) results meeting exceeded market expectations. Xinchuang is a solid foundation for AI's long-term development. The importance of autonomous infrastructure base to AI's development is becoming more and more prominent. On July 4, 2023, the Wall Street Journal reported that the United States may intend to restrict Chinese companies from accessing and using AI cloud computing services, further reflecting the necessity of autonomous AI. The degree of AI localization is gradually improving. For example, the tender announcement of Qingdao Haizhi Intelligent Computing Center clearly requires that the proportion of domestic artificial intelligence accelerator cards is ≥ 70%. According to the report of Xinmin Evening News, Yang Fan, vice president of Shang Tang, said that the Lingang Intelligent Computing Center is expected to realize 50% localization of computing hardware by 2024.

CPU + GPU new product cycle open, help the company's development to a higher level. CPU, 2022 Q4, the company to achieve Haiguang No. 3 sales, 2023 has become the main sales product. According to the company's announcement, Haiguang 3 support memory frequency increased to 3200MHz, the overall measured performance increased by about 45%, all aspects have been optimized, the market response is good, to help the company's 2023Q1 performance steady growth. With the smooth promotion of Haiguang 3 and Haiguang 4 and other new products continue to launch, the company's leading position in the server CPU market is expected to continue to consolidate. In terms of GPU, the current performance of Deep Computing One is in the forefront of the country, leading mass production, compatible with CUDA's autonomous software ecology has significant advantages, in the domestic large model field also has many cases accumulated. We expect Deep Calculation II to be released at 23H2, and its performance is expected to improve significantly. With the launch of Deep Calculation II and Deep Calculation III, the company is expected to establish a leading position in the field of autonomous GPUs.

development prospects, the company is expected to become a CPU + GPU leader. As a leader in the domestic CPU and GPU field, Haiguang Information has scarcity at the ecological and performance levels, and the two product lines are expected to produce synergy, helping China's computing infrastructure to become autonomous. CPU, the company has always maintained the domestic scarce smooth replacement advantage, the market position continues to improve, in the telecommunications finance and other areas of credit creation continued to gain recognition, we believe that the future of the company in the domestic server CPU market leading position is higher certainty. For the GPU industry, the current is the peak of global AI development, but also the key window period of China's domestic GPU development, we believe that Haiguang is expected to rely on ROCm-based independent ecology, coupled with the continuous promotion of product sequence, to consolidate its leading position in the country, to become an independent GPU leader.

risk factors: the risk of insufficient accumulation of the company's core technology or less-than-expected R & D iterations; the risk of high concentration of the company's suppliers and difficulty in replacing some suppliers; the risk of increased market competition; the risk of market uncertainty brought about by the macro environment; and the risk of a slowdown in the pace of demand for the company.

earnings forecast, valuation and rating: with the continuous promotion of industry trust, Haiguang CPU development certainty is high, strong demand in the AI field is expected to drive the development of Haiguang GPU. The company's development prospect is promising for a long time, but considering the uncertainty of Xinchuang's bidding rhythm, we adjusted the company's revenue forecast for 2023-2025 to 68.60/90.57/11.864 billion yuan (originally expected to be 73.30/102.93/13.668 billion yuan); Adjust EPS forecast for 2023-2025 to 0.52/0.74/1.03 yuan (originally expected to be 0.56/0.87/1.18 yuan), corresponding to net profit forecast of 12.06/17.19/2.405 billion yuan. We continue to be optimistic about the development of Haiguang in the CPU and GPU market, maintain a "buy" rating, considering that the company's new products have not yet been issued, need to continue to track and observe, temporarily do not give the target price.