The company announced the 2024 performance forecast: the revenue in 2024 will be 2.323 billion yuan, basically the same as the same period last year, and the net profit attributable to the parent company will be -613 million yuan, a year-on-year decrease of 317 million yuan, and the year-on-year increase in losses will be mainly due to the company's increased technology research and development efforts in key application fields, and actively deploy Chiplet, AIGC and autonomous driving and other fields, and the research and development expenses in 2024 will increase by 32% year-on-year. 4Q24 achieved revenue of 673 million yuan, a year-on-year increase of 17.4%, but a month-on-month decrease of 6.2%; The net profit attributable to the parent company was -217 million yuan, a year-on-year decrease of 55 million yuan and a month-on-month decrease of 106 million yuan. We are optimistic about the company's forward-looking investment and technological advantages in strategic areas such as AIGC and Chiplet, and the medium- and long-term performance is expected to continue to grow, and we maintain our "buy" rating.

IP business: Q4 IP business seasonal fluctuations, but subsequent growth momentum is sufficient

Q4 The company's IP licensing business revenue decreased by about 28% year-on-year, which we believe is mainly due to the seasonal fluctuation of IP business. We see that in the first three quarters, VeriSilicon's AI computing power-related revenue accounted for 48.59% of the total revenue of IP intellectual property licensing business. Therefore, looking ahead to 2025, we believe that market demand such as AI computing power will be the core driver. With the continuous implementation of cloud training and inference, AI glasses and other terminals, we believe that the company's demand from data processing, device-side AI and other fields is expected to increase, driving the growth of GPU/NPU/VPU processor IP revenue. In the medium to long term, we are optimistic that VeriSilicon will continue to benefit from the AIGC wave and the chiplet trend. VeriSilicon's NPU IP has been used by 72 customers in 128 AI chips in various market segments, and the demand for advantageous AI-related IP such as GPGPU/NPU IP is expected to maintain a rapid growth trend in the future.

Customized business: Q4 design and mass production business continued to pick up, with abundant orders in hand

Q4 The company's chip design business and chip mass production business revenue increased by about 81%/32% year-on-year respectively, which we believe is mainly due to the growth in demand for advanced process design services projects of 14nm and below, and more large-scale projects continue to land in Q4. From the end of 2023, the inventory situation of downstream customers has improved significantly, the demand has continued to increase, and the company's orders in hand have remained high for five consecutive quarters, with orders in hand as of 4Q24 being 2.406 billion yuan, an increase of nearly 13% from the end of the third quarter. Q4 signed more than 940 million yuan of new orders, we believe that the company's future revenue foundation is solid. We believe that with the increase in orders for the company's chip design business and the gradual investment of the company's R&D resources into customer projects, the company's performance is expected to improve in the future.

Target price of 67.80 yuan, maintain "buy" rating

Considering the company's short-term AIGC and other strategic project expenses, we lower the 24-year net profit attributable to the parent company to -613 million yuan (previous value: -434 million yuan). The forecasts for 2025/2026 are $0.03/$94 million, respectively. Respectively, the chip customization/IP licensing business is valued at 6.8/23.0x 25E PS (the average consensus expectation of comparable companies is 5.9x/19.5x, and the premium is mainly based on VeriSilicon's A-share scarce target and significant competitive advantage in the HPC/AI field). However, considering that the company's R&D investment remains high, the company's short-term performance growth may be slower than that of comparable companies, so the premium rate is lowered), and the corresponding target price is 67.80 yuan (the previous value is 67.27 yuan), maintaining a "buy" rating.

Risk warning: the risk of R&D failure, the risk that the localization process is less than expected, and the risk of macroeconomic downturn.