Revenue rose quarter-on-quarter in 2023, with 1Q24 revenue up 76% year-on-year. Due to the decline in global demand for servers and computers and the de-stocking of related chips, the company realized revenue of 2.286 billion yuan (YoY -37.76%), net profit of 0.451 billion yuan (YoY -65.30%) and net profit of 0.37 billion yuan (YoY-58.11) after deducting non-return. Due to the increase in the proportion of DDR5 related products, the company's gross profit margin increased by 12.5pct to 58.91.

4Q23 revenue of 0.761 billion yuan (YoY -4%, QoQ + 27%), net profit of 0.217 billion yuan (YoY-28, QoQ + 43%), gross profit margin of 57.44 (YoY +1.0pct,QoQ -7.4pct). According to the earnings forecast, 1Q24 company's revenue was 0.737 billion yuan, up 76% YoY, while net profit attributable to the parent company was 2.10-0.24 billion yuan, up 9.65-11.17 times YoY.

DDR5 penetration increased, the company is the first to open child iteration. In terms of business, the company's revenue from interconnected chips in 2023 was 2.185 billion yuan (YoY-20.11%), accounting for 96%, and the gross profit margin increased by 2.6pct to 61.36; the revenue from server platform was 0.094 billion yuan (YoY-90%), accounting for 4%, and the gross profit margin decreased by 6.5pct to 4.01. With the launch of mainstream server CPU platforms supporting DDR5, the downstream penetration rate of DDR5 has increased significantly, driving the company's DDR5 related product shipments to grow steadily from 2Q23, and the penetration rate of DDR5 is expected to exceed 50% in 2024. In order to maintain its leading position, the company took the lead in opening DDR5 sub-generation iteration, taking the lead in trial production of DDR5 third-generation RCD chips in October 2023, and launching DDR5 fourth-generation RCD chips supporting 7200MT/s data rate in January 2024.

launched a variety of high-performance "capacity" chips to seize AI opportunities, some products have begun to ship.

the company focused on "capacity" demand layout of a series of high-speed interconnect chip solutions, including PCIeRetimer, MRCD/MDB, CKD, MXC and other chips, some new products have begun to scale shipments.

PCIe 5.0 Retimer chip has been successfully imported into AI server procurement projects of some mainstream cloud computing/internet manufacturers at home and abroad, and has started large-scale shipment, with about 150000 1Q24 shipments, more than 1.5 times of the product's 2023 shipments. The server high-bandwidth memory module with MRCD/MDB chip of the company has been tested on a large scale by mainstream cloud computing/internet manufacturers at home and abroad, 1Q24 Company's MRCD/MDB chip revenue exceeded 20 million yuan for the first time.

investment suggestion: downstream demand resumes and new product scale shipments, maintaining the "buy" rating company 1Q24 company's revenue of 0.737 billion yuan (YoY +75.74%). considering the server and computer industry's restocking after the inventory is completed and some of the company's new products begin scale shipments, we expect the company's net profit to be 11.83/17.89/2.454 billion yuan in 2024-2026, the PE corresponding to the share price on April 19, 2024 is 44/29/21x. The company's downstream demand gradually resumed the overlay of new product volume, maintain a "buy" rating.

Risk Warning: New product development is less than expected; customer validation is less than expected; demand is less than expected.