Source: Times Business Research Institute

Author: Sun Huaqiu

Edited by Han Xun

[Introduction].

In 2024, the semiconductor industry will enter a recovery cycle, however, the analog chip head company SRP (688536. SH) handed over a report card of "increasing income but not increasing profits".

According to the performance report, in 2024, the company's operating income is expected to increase by 11.52% year-on-year, and the net profit attributable to the parent company will continue the loss trend in 2023, with the loss expanding to -195 million yuan, bucking the trend in the industry cycle dividend.

Times Business Research Institute found that the impairment of inventory decline has become the source of devouring SRP's net profit for two consecutive years, and its inventory impairment loss has climbed from 24.33 million yuan in 2023 to 92 million yuan in 2024.

In addition, in 2024, although SRP completed the merger and acquisition of Shenzhen Chuangxin Microelectronics Co., Ltd. (hereinafter referred to as "Chuangxin Microelectronics"), it failed to reverse the loss, but brought a large amount of goodwill of 738 million yuan.

From March 7th to 10th, on issues such as loss expansion and merger and acquisition risks, Times Business Research Institute sent a letter to Siruipu and called to inquire, and the staff replied on the phone that they were aware of the relevant situation. However, as of press time, the other party has not responded to relevant questions.

[Summary].

1. The industry is picking up, but it has fallen into the dilemma of "the more you sell, the more you lose". In 2024, in the context of the recovery of the industry, SRP is expected to achieve revenue of 1.220 billion yuan, a year-on-year increase of 11.52%; The net profit attributable to the parent company was -195 million yuan, and the loss further widened compared with 2023. At the same time, SRP plans to accrue an inventory price loss of about 92 million yuan, an increase of 2.78 times from 24.33 million yuan in 2023.

2. The two major measures of endogenous and extension seek to break the situation. In the face of increasingly fierce market competition, SRP has built a transformation path of "product matrix upgrade + epitaxial mergers and acquisitions". In terms of product matrix upgrading, SRP focuses on seeking breakthroughs in the fields of automotive-grade chips and industrial robots. In terms of epitaxial growth momentum, SRP has improved its product layout and enhanced its market competitiveness through the acquisition of Chuangxin Micro.

3. Pay attention to the triple variables in the throes of transformation. For the breakthrough of SRP's transformation, investors need to review its strategic resilience from a long-term perspective, and look for opportunities to realize value in the midst of fluctuations, especially focusing on three key variables: the optimization of SRP's product structure and market expansion effectiveness, the release of synergies from mergers and acquisitions, and the progress of industry inventory depletion.

[Text].

1. Performance: The industry has picked up, and losses have increased instead of decreasing

In 2023, the prosperity of the global semiconductor market will be relatively sluggish. In 2024, with the destocking of semiconductor products, artificial intelligence and consumer electronics will drive downstream demand to pick up, and the global semiconductor sales amount will bottom out.

According to a report released by the World Semiconductor Trade Statistics Organization (WSTS) in February 2025, the global semiconductor market size will be $628 billion in 2024, a year-on-year increase of 19.1%.

However, in the context of the overall improvement of the industry, SRP has fallen into the dilemma of "selling more and losing money".

According to the financial report, in 2023, SRP's operating income will be 1.094 billion yuan, a year-on-year decrease of 38.68%; The net profit attributable to the parent company was -34.7131 million yuan, a year-on-year decrease of 113.01%, which was the first loss since its listing.

According to the latest performance report, in 2024, SRP is expected to achieve revenue of 1.22 billion yuan, a year-on-year increase of 11.52%; The net profit attributable to the parent company was -195 million yuan, and the loss further expanded.

In stark contrast, Shengbang Co., Ltd. (300661. SZ), but the performance is eye-catching.

According to the latest performance forecast, in 2024, the net profit attributable to the parent company of Shengbang Co., Ltd. is expected to be 449 million ~ 533 million yuan, a year-on-year increase of 60% ~ 90%; The net profit after deduction was 388 million ~ 472 million yuan, a year-on-year increase of 83.32% ~ 123.10%.

This difference in performance reflects the survival dilemma of SRP in the industry's recovery cycle.

As for the reasons for the loss, SRP explained in the performance express report that during the reporting period, the company's terminal markets such as wireless communication and pan-industry have experienced a long period of inventory depletion, due to fierce market competition, the company's product prices are under pressure, which has a certain impact on the growth of operating income and gross profit margin; The company continued to invest in R&D and actively explore the market, during which the cost increased; Affected by the stocking of the wafer capacity guarantee agreement in previous years and the changes in market demand, the proportion of the company's long-aged inventory has increased, and the company plans to make a provision for inventory price decline of more than 92 million yuan in the reporting period.

It can be seen that the price war, the increase in expenses, and the decline in inventory prices are the main reasons for the expansion of the loss of SRP.

From the perspective of gross profit margin, according to the performance report, in 2024, the comprehensive gross profit margin of SRP will be 48.20%, down 3.59 percentage points from 51.79% in 2023 and 13.03 percentage points from 61.23% at the peak in 2020.

Compared with its peers, although Shengbang has not yet disclosed its gross profit margin in 2024, its gross profit margin in the first three quarters of 2024 is 52.17%, an increase of 2.57 percentage points from 49.60% in 2023.

It should be noted that inventory destocking has been a major problem faced by SRP in recent years.

Wind data shows that in the first three quarters of 2021-2024, the inventory turnover days of SRP were 74.80 days/year, 106.67 days/year, 245.55 days/year, and 244.32 days/year, respectively, showing a continuous upward trend as a whole.

According to the performance report, in 2024, SRP plans to accrue about 92 million yuan of inventory price loss, an increase of 2.78 times from 24.33 million yuan in 2023.

However, in the first three quarters of 2024, the net operating cash flow of SRP was 17.3404 million yuan, an improvement from -143 million yuan in the same period of 2023.

2. Strategic transformation path: product matrix upgrade + epitaxial mergers and acquisitions

In the face of increasingly fierce market competition, SRP has built a transformation path of "product matrix upgrade + epitaxial mergers and acquisitions".

In terms of product matrix upgrading, SRP focuses on seeking breakthroughs in the fields of automotive-grade chips and industrial robots.

According to the research announcement on March 3, SRP revealed to institutional investors that in 2024, the company will launch more than 200 automotive-grade chips, covering scenarios such as intelligent cockpit, ADAS (advanced driver assistance system), power system, etc., and has cooperated with major domestic car manufacturers and Tier1, and the scale of customers continues to expand.

At the same time, SRP also said that the company's main products include signal chain analog chips, power management analog chips and related digital-analog hybrid chips, which have been widely used in the industrial robot (industrial servo) market. The company will continue to promote the customer expansion and product introduction of related products in emerging application markets such as humanoid robots.

It is worth mentioning that although SRP has taken action in the fields of automotive-grade chips and industrial robots, it has not disclosed the specific revenue data of the above-mentioned businesses. As a new entrant, it remains to be seen how well it will work.

In terms of epitaxial growth drivers, SRP strengthened the power management chip (PMIC) product line through the acquisition of Chuangxin Micro, and formed a "signal + power" solution with signal chain chips.

According to the announcement, the merger and acquisition of Chuangxin Micro is a positive attempt made by SRP in terms of extension development, and the merger and acquisition project has completed the equity transfer on October 23, 2024, and has been officially consolidated since November.

At the end of October 2024, SRP told the research agency that the company hopes that through the continuous promotion of the project, it can give full play to business synergies, accumulate experience in the whole process of mergers and acquisitions and industrial integration, and prepare for the occurrence of larger-scale or more strategic mergers and acquisitions in the future.

It should be noted that Chuangxin's customers are mainly concentrated in the field of consumer electronics, which is complementary to SRP's industrial customers, but the weak consumer electronics market will also bring certain integration risks.

In addition, the gross profit margin of Chuangxin Micro is lower than that of Siruipu, and the merger and acquisition has brought 738 million yuan of goodwill to Siruipu, which may have a certain impact on the operation of Siruipu.

According to the announcement released in August 2024, from 2022 to 2023, Chuangxin's net profit will be -6.4472 million yuan and -4.2809 million yuan respectively, both of which are in a state of loss; The gross profit margin was 35.34% and 27.03% respectively, showing a downward trend. As of now, Chuangxin's 2024 performance has not been disclosed.

After the completion of the merger and acquisition, the original team of Chuangxin Micro retains an independent operating structure, and the release of business synergies between the two parties needs to rely on the follow-up integration and promotion, which has not yet been fully manifested in the short term.

3. Core viewpoint: pay attention to the triple variables in the painful period of transformation

Compared with its peers, the dilemma of "increasing revenue but not increasing profits" has cast a shadow on its future development. For SRP's transformation breakthrough, investors need to review its strategic resilience from a long-term perspective and look for opportunities to realize value in the midst of volatility.

Times Business Research Institute believes that whether the transformation of SRP can be effective will depend on the following variables:

3.1 Product structure optimization and market expansion results

If new products such as automotive-grade chips can continue to gain market recognition, achieve large-scale mass production and sales, and increase the proportion of revenue in high value-added fields, this will help SRP improve its gross profit margin and profitability. Subsequently, investors need to pay attention to the depth and breadth of customer expansion in terms of new products, as well as market feedback and sales growth after product introduction.

3.2 M&A integration synergies release

In 2024, SRP acquired 100% of the equity of Chuangxin Micro, and the integration progress and synergy between the two parties in terms of business, customers, and technology are crucial. If it can be effectively integrated, leverage the advantages of the "signal + power" solution, expand market share and improve operational efficiency, it will provide impetus for SRP's profitable growth. On the other hand, if the integration is not smooth, not only the goodwill may face the risk of impairment, but also the overall operation of SRP may be dragged down. Investors need to pay attention to the progress of both parties in product development collaboration, customer resource sharing, cost control, etc.

3.3 Progress of industry inventory depletion

At present, the market competition in the semiconductor industry is becoming increasingly fierce, and the fluctuation of product prices has a significant impact on the profitability of SRP. With the gradual recovery of the industry, Ruosripu can occupy a favorable position in the price competition by virtue of inventory removal and product advantages, and avoid excessive decline in product prices, which will have a positive impact on its profitability. On the contrary, if the global semiconductor inventory reduction in 2025 is less than expected, the price war may further intensify and have an adverse impact on the operation of SRP. Investors need to pay attention to the changes in the competitive landscape of the industry and the market reaction of SRP to the adjustment of the strategy of competitors.

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