In 2024, the performance will achieve high growth, and the marketing model will be based on direct sales. The company will achieve revenue of 9.162 billion yuan in 2024, a year-on-year increase of +52.40%; net profit attributable to the parent company was 1.931 billion yuan, a year-on-year increase of +52.87%; deducted non-net profit of 1.816 billion yuan, a year-on-year increase of +59.79%. By product split, processor revenue in 2024 will be 9.134 billion yuan, accounting for 99.70%, +51.94% year-on-year, and gross profit margin of 63.70%; The revenue of technical services was 28 million yuan, accounting for 0.30%, and the gross profit margin was 70.96%. According to the sales model, the direct sales revenue in 2024 will be 7.769 billion yuan, accounting for 84.79%, a year-on-year increase of +39.36%, and a gross profit margin of 61.84%; Distribution revenue was 1.393 billion yuan, accounting for 15.21%, +218.57% year-on-year, and gross profit margin was 74.18%.

Generative AI (AIGC) is emerging, and the demand for computing power is increasing. (1) With the deep integration of AIGC with the Internet, big data, real economy and other fields, as well as the continuous development of multimodal generative models, the application of AI technology is rapidly being released to many fields such as industry, medical care, and education, continuously deepening and building a large number of new scenarios, which have a profound impact on the development of multiple industries, and artificial intelligence is ushering in a golden age of rapid development. (2) Benefiting from the continuous enrichment of data resources, the growth of demand for computing hardware resources, and the breakthrough development of large model technology, according to iResearch's forecast quoted in the 2024 annual report, China's AIGC industry will continue to grow. In 2028, the scale of China's AIGC industry is expected to reach 720.2 billion yuan, and it is expected to exceed one trillion yuan by 2030, with an average annual compound growth rate of 115.06% from 2023 to 2028.

CPU &DCU two-wheel drive, sales and R&D are promoted simultaneously. (1) The company's CPU products have further expanded the market application field and expanded the market share; The rapid iterative development of the company's DCU products has been widely recognized by the market, which has further promoted the rapid growth of performance. (2) Sales expenses in 2024 will be 176 million yuan, a year-on-year increase of +58.11%.

The company further strengthened its marketing capabilities, and the increase in sales personnel led to an increase in employee compensation; At the same time, the company actively made efforts in the marketing and ecological construction of high-end processors, and the related market expenses increased compared with the same period last year.

(3) In 2024, the company's R&D expenses will be 2.910 billion yuan, a year-on-year increase of 46.05%. Based on the long-term development strategy, the company strengthened its technical reserves and enhanced its market competitiveness by expanding the size of its R&D team (the number of R&D personnel increased by 31% over the same period last year), accelerating the R&D process of new products and increasing investment in R&D projects. At the same time, there are more expense items, resulting in a rapid increase in R&D expenses.

The production and sales ratio was optimized, and the top five customers accounted for 40.26% of the related party transactions. (1) In 2024, the company's high-end processor production and sales rate will be 75.35%, a decrease of 77.94 percentage points compared with the previous year. The company adopts the strategy of "capacity planning and semi-finished product stocking", formulates a production plan 6 months in advance, and prepares an appropriate amount of wafers and bare wafers (semi-finished products) for production in advance. In 2024, the company adjusted its production plan according to changes in market demand and optimized its production and sales ratio compared with the same period last year. (2) The company's top five customers in 2024 will be 8.994 billion yuan, accounting for 98.16% of annual sales; Among them, the sales of related parties in the sales of the top five customers were 3.689 billion yuan, accounting for 40.26% of the total annual sales. (3) The company's top five suppliers in 2024 will purchase 5.830 billion yuan, accounting for 67.64% of the total annual procurement; Among them, the procurement amount of related parties in the procurement amount of the top five suppliers is 0 yuan, accounting for 0% of the total annual procurement.

Profit Forecast and Investment Suggestions:

We believe that the company is a leading CPU and DCU company in China, and is expected to benefit from the increase in demand brought by information innovation and AI. We expect that in 25-27 years, the company's high-end processor product revenue growth rate will be 40%, 35%, and 32%, and the company's operating income growth rate will be 40%, 35%, and 32% respectively. With the emergence of new products and the improvement of operating efficiency, the company's gross profit margin will gradually increase, we expect that in 25-27 years, the gross profit margin of the company's high-end processor products will be 61.70%, 62.00% and 62.30% respectively, and the overall gross profit margin of the company in 25-27 years will be 61.73%, 62.03% and 62.33%.

We estimate that the company's operating income from 2025 to 2027 will be 128.27/173.16/22.858 billion yuan, the net profit attributable to the parent company will be 27.43/36.88/4.931 billion yuan, and the corresponding EPS will be 1.18/1.59/2.12 yuan respectively. Combined with the current industry stage and the company's growth rate and barriers, the company is given a dynamic PS of 30-35 times in 2025, and a reasonable value range of 165.56-193.15 yuan in 2025, giving a "better than the market" rating.

Risk warning: the product iteration speed is not as fast as expected; The proportion of related-party transactions is relatively large; The trade friction between China and the United States has escalated.