event: on April 28, 2024, pran shares released the first quarter report of 2024, Q1 realized operating income of 0.405 billion yuan, yoy +98.52%. The net profit of the parent company was 49.9239 million yuan, up 78.065 million yuan from the same period last year.

revenue growth, gross margin increased for three consecutive quarters. Q1 realized operating income of 0.405 billion yuan, yoy +98.52%,qoq +12.51%. The net profit of the parent company was 49.9239 million yuan, up 78.065 million yuan or qoq-6.34 from the same period last year. Achieve gross margin of 31.80, qoq plus 4.03pct. The company's revenue has achieved substantial growth year-on-year and month-on-month, and gross profit margin has achieved month-on-month growth for three consecutive quarters, mainly benefiting from the rebound in downstream demand such as consumer electronics and the increase in the company's market share.

NOR Flash rate recovery, vehicle gauge EEPROM batch delivery. Benefiting from the recovery of downstream demand, Huabang and Wanghong's growth rate continued to rise, the foundry business climate and the growth rate recovered simultaneously, in the case of limited supply growth, NOR Flash prices are expected to usher in an upward trend. In addition, new trends in industries such as AIPC are expected to drive overall shipments, thereby indirectly driving NOR Flash demand. In terms of EEPROM, the company's vehicle series EEPROM products have passed the A1 level certification, in the body camera, vehicle control, entertainment systems and other applications continue to expand domestic and foreign customers, and to achieve the bulk delivery of customers at home and abroad, automotive electronics revenue ratio continues to increase.

MCU prices bottomed out, expanding industrial control, consumer areas. Intensified competition in the MCU industry in 2023 led to a continued decline in product prices, which are now at the bottom of the industry and some products have rebounded slightly. The company continues to expand MCU product series from various angles such as function development, performance upgrade, diversification of usage scenarios, full coverage of packaging forms, etc. Motor-specific M0 + MCU products and ultra-low power consumption M0 + MCU products have been mass-produced. M4 MCU products have been mass-produced and shipped with more than 10 material numbers in one series. Under the trend of domestic substitution, the company continues to import consumer electronics, industrial control and many other downstream end applications, with the company's MCU products gradually complete customer certification, is expected to achieve volume in consumer electronics, industrial control and other fields.

product line continues to be rich, storage + MCU + simulation. The company insists on increasing investment in research and development in the downward range of the cycle, with full-year research and development costs of 0.191 billion yuan in 2023, yoy plus 28.74%, product competitiveness and coverage further enhanced. In terms of memory chips, the company's 40nm SONOS process NOR Flash has become the main process node. Under this process, the whole series of products with 4Mbit to 128Mbit capacity have been mass produced, further improving the cost advantage and meeting the area requirements of downstream applications. Ultra-low voltage 1.2V series EEPROM has been mass produced and shipped, covering 32Kbit to 512Kbit. MCU applications continue to improve, the company has launched the ARM M0 and ARM M4 core 12 series of more than 200 MCU chip products. In addition, the company expanded the VCM driver to form a good synergy with EEPROM.

investment advice: it is estimated that the company's net profit attributable to its parent in 2024/25/26 will be 2.03/2.71/0.325 billion yuan respectively, and the corresponding current price PE in 2024-2026 will be 41/30/25 times respectively. We are optimistic about the company's leading layout in storage NORFlash and EEPROM, and continue to create new growth poles as the MCU and analog chips expand. Maintain a "recommend" rating.

Risk Warning: Terminal demand recovery is less than expected, product validation is less than expected, macroeconomic fluctuations.