investment points:

2023 annual report: dongxin's operating income was 0.531 billion yuan, up -53.70 year on year; The net profit attributable to shareholders of listed companies was -0.306 billion yuan, up -265 year on year. Non-net profit attributable to mother and mother deduction was -0.327 billion yuan, up -298 year on year. In 2023, the company spent 0.182 billion yuan on research and development, with a research and development investment ratio of 34.34. 2023 results are largely in line with expectations.

dongxin shares are one of the few memory chip Fabless companies in China that provide NAND/NOR/DRAM products at the same time. the Ministry of industry and information technology "specializes in special new small giant enterprises". In 2019, the global market size of SLC NAND Flash is about $1.671 billion, and the market share of Dongxin's SLC NAND Flash is about 1.26 percent; the global market size of niche DRAM is about $5.5 billion in 2019; and the global NOR Flash market size is about $3.1 billion in 2021. Dongxin shares in the niche memory chip market share is still in the low single digits. In February 2024, the company intends to set up Shanghai One Core General Sense Technology Co., Ltd., the new Wi-Fi 7 wireless communication chip business.

Dongxin shares wafer foundries are mainly SMIC and Li product power, sealing and testing plants are mainly Ziguang Hongmao, China Resources Ansheng, Nanmao Technology, AT Semicon and other companies. The concentration is high in both wafer foundries and packaging and testing plants, with the top five suppliers accounting for more than 80% of purchases. The cost structure remains relatively stable, with raw materials accounting for about 80%, sealing costs accounting for about 15%, and the 2021-2022 semiconductor cycle affecting cost structure fluctuations.

Dongxin shares SLC NAND and NOR Flash are mass produced by Li-product power and SMIC's international advanced process, and 1xnm NAND Flash and 48nm NOR Flash are used to lead the process. The mainstream process of SLC NAND Flash is still the 2x-3xnm process, and the products of the 2xnm process node are gradually on the market and are expected to replace the 38nm-40nm process node products in the future. LPDDR products have DDR3(L), LPDDR1, LPDDR2, new product LPDDR4x has completed the reliability verification. Based on the 48nm and 55nm processes, Dongxin shares NOR Flash products up to 1Gb capacity.

Dongxin semiconductor downstream mainly for communication equipment, security monitoring, wearable devices, mobile terminals and other terminal products, to promote products from the industry to the car regulations. In 2022, Dongxin's SLC NAND Flash based on SMIC's 38nm process platform and NOR Flash based on Liji's 48nm process platform all passed the AEC-Q100 test. In 2023, the company has products sold to well-known Tier1 abroad.

lowered its earnings forecast and maintained its "overweight" rating. Due to the current slow recovery of SLC NAND, the 2024-2025 net profit forecast was lowered from 1.95/0.336 billion yuan to 0.70/0.181 billion yuan, with an additional 2026 forecast of 0.295 billion yuan. In 2024, the profitability of niche semiconductor storage is still in the repair period, and the profit margin is much lower than the historical level. The average PE value of comparable companies (Ruixin Micro, Gakey Micro, Core Sea Technology) in 2025 is 52X, corresponding to 11% of the medium-term target market value of Dongxin shares, maintaining the "overweight" rating.

risk tips: 1) R & D team risk 2) product iteration risk caused by technology upgrade 3) high supplier concentration risk