Investment Highlights:

A leading domestic storage module enterprise, integrating R&D, packaging and testing to enhance competitiveness. BIWIN's main products are memory, and its main services are advanced packaging and testing. Memory products include embedded storage, PC storage, mobile storage, industrial and vehicle specification storage and enterprise-level storage, of which embedded storage, PC storage and mobile storage contribute more than 90% of the company's revenue, and are widely used in many high-growth fields such as smart terminals, data centers, and smart cars. At the same time, the company has built an integrated layout of R&D, packaging and testing around the upstream and downstream industrial chain of memory. As a leading domestic memory module company, in June 2024, the company was successfully selected as a sample stock of the "Science and Technology Innovation 50" Index with its outstanding innovation ability and excellent performance growth.

The recovery of the industry cycle and the wave of AI have led to the continuous growth of the company's main storage business. Since the third quarter of '24, affected by weak demand, channel destocking, and cautious customer stocking, short-term storage prices are in a correction stage and are expected to continue to grind out until the first quarter of '25. Against the macro backdrop of maintaining a loose monetary policy around the world, with the arrival of the peak of CSP procurement, the growth of demand for AI storage applications, the continuous digestion of downstream inventories, the transfer of original factories and the planned new round of production cuts, we believe that the storage industry is expected to usher in spring again, and storage prices are expected to stop falling and rebound in 25 years, and the cyclical recovery trend remains unchanged. BIWIN Storage occupies the key capabilities and layout of memory applications, and has launched thousands of storage products: it has the advantages of small size, low power consumption and high performance in the field of embedded storage, and has the characteristics of high performance and high quality in the field of PC storage and mobile storage, and has achieved vehicle specification certification and mass production and delivery of leading enterprises in the field of industrial and vehicle specification storage, and forward-looking layout of enterprise-level SSD, RD memory modules and CXL memory modules in the field of enterprise-level storage, and the company's product and brand competitiveness has continued to improve.

In the era of AI computing power, advanced packaging and testing ushered in accelerated development, and the company increased its layout to the second growth curve. As silicon chips reach their physical limits and the cost of improving chip performance by shrinking transistors becomes more and more expensive, advanced packaging has become one of the best options to continue Moore's Law, and the global advanced packaging market is expected to grow from $46.83 billion in 2023 to $78.55 billion in 2028, with a CAGR of 10.9%. The company has a forward-looking layout of advanced packaging and testing, with its subsidiary Tailai Technology as the advanced packaging and testing and memory manufacturing base, and at the same time invests in the construction of wafer-level advanced packaging and testing manufacturing projects in Songshan Lake, Dongguan, with a total investment of 3.09 billion yuan, which is expected to be put into operation in 2025, when it will have the packaging and testing capacity of 20,000 pieces of 12-inch wafers per month, fill the gap in the wafer-level advanced packaging and testing industry in the Greater Bay Area, meet the packaging and testing needs of advanced memory and regional markets, and help the Greater Bay Area build the third pole of integrated circuits.

Profit forecast, valuation analysis and investment advice: With the cyclical recovery of the storage industry, BIWIN Storage, as a leader in storage modules, is expected to further increase its market share through a full range of differentiated product systems and services. At the same time, the company actively lays out the field of advanced packaging and testing, explores the second growth curve, and promotes the complementary and strong chain of the semiconductor industry in the Greater Bay Area, so as to ensure the company's competitive advantage in the AI and post-Moore era and achieve long-term and steady growth. It is estimated that the company's net profit attributable to the parent company in 2024-2026 will be 3.42/5.84/784 million yuan, a year-on-year increase of 154.8%/70.8%/34.2%, corresponding to EPS of 0.79/1.35/1.82 yuan, and PE of 74.2/43.4/32.4 times.

Risk warning: the risk of market demand is less than expected, the risk of inventory price decline, the risk of R&D falling less than expected, the risk of supply chain, and the risk of restricted import of semiconductor equipment.