Matters:

In 2024, the company will achieve revenue of 3.639 billion yuan, a year-on-year increase of 59.20%, and a net profit attributable to the parent company of 1.412 billion yuan, a year-on-year increase of 213.10%; In the first quarter of 2025, the company is expected to achieve revenue of 1.222 billion yuan, a year-on-year increase of 65.78%, and is expected to achieve a net profit attributable to the parent company of 510-550 million yuan, a year-on-year increase of 128.28%-146.19%. In 2024, the company plans to distribute a cash dividend of 3.90 yuan (tax included) for every 10 shares, without giving bonus shares, and without converting provident fund into share capital.

Ping An's view: The

recovery growth of memory interface chips, the large-scale shipment of new products of transportation capacity chips, and the rapid growth rate of the company's performance in 2024. In 2024, the company will achieve revenue of 3.639 billion yuan, a year-on-year increase of 59.20%, a net profit attributable to the parent company of 1.412 billion yuan, a year-on-year increase of 213.10%, a net profit of 1.248 billion yuan, a year-on-year increase of 237.44%, and an operating cash flow of 1.691 billion yuan, a year-on-year increase of 131.29%. The main reasons for the significant growth of the company's operating performance in 2024 include: on the one hand, benefiting from the gradual recovery of demand in the global server and computer industry, the company's demand for memory interface and module supporting chips has achieved restorative growth, and at the same time, benefiting from the increase in the downstream penetration rate of DDR5 and the continuous iteration of the next generation, the company's DDR5 memory interface chip shipments exceed DDR4 memory interface chips, and the shipments of DDR5 second-generation memory interface chips exceed the first-generation products; On the other hand, benefiting from the promotion of AI industry trends, the company's three new high-performance capacity chip products (PCIeRetimer, MRCD/MDB and CKD) began to be shipped on a large scale, among which: PCIe Retimer chips have been applied on a downstream scale, MRCD/MDB chips and CKD chips have begun to be tried on an industry scale, and the total sales revenue of the three new products is about 422 million yuan, which is 8 times that of 2023, contributing new performance growth points to the company.

In 1Q25, the company's revenue and profit hit a record high in a single quarter, and the annual capacity chip will show a good growth trend. In the first quarter of 2025, the company is expected to achieve revenue of about 1.222 billion yuan, a year-on-year increase of 65.78%, of which the revenue of interconnection chips is about 1.139 billion yuan, a year-on-year increase of 63.92%, and the net profit attributable to the parent company is expected to be 510-550 million yuan, a year-on-year increase of 128.28%-146.19%, and the net profit is expected to be 485-525 million yuan, a year-on-year increase of 120.82%-139.03%. The main reasons for the significant growth of the company's operating performance are: 1) the strong demand in the industry driven by the trend of the AI industry, the continuous improvement of DDR5 penetration, the significant growth of the company's DDR5 memory interface and module supporting chip shipments, and the increase in the proportion of second and third generation RCD chip shipments, which promoted the significant growth of the company's memory interface and module supporting chip sales revenue; 2) The total sales revenue of the company's three high-performance transportation chips was 135 million yuan, a year-on-year increase of 155%; 3) With the increase in the proportion of sales revenue of DDR5 memory interface chips and high-performance transportation capacity chips, the gross profit margin of the company's interconnection chip product line has further improved. In the first quarter of 2025, the company expects that the revenue of interconnection chips, net profit attributable to the parent company, and net profit deducted from non-attributable to the parent company will achieve quarter-on-quarter growth for eight consecutive quarters, and looking forward to the whole year of 2025, it is expected that the demand and penetration rate of DDR5 memory interface chips will increase significantly compared with 2024, and the demand for high-performance capacity chips will show a good growth trend.

The company's strategic goal in the next five to ten years is to gradually grow into an international leading fully interconnected chip design company, focusing on the field of transportation capacity chips. The company will mainly carry out business layout through three dimensions: memory interconnection, PCIe/CXL interconnection, Ethernet and optical interconnection. 1) Memory interconnection: The company will continue to invest in the iterative upgrading of DDR memory interface products, leading the technological innovation of MRCD/MDB and CKD chips. 2) PCIe/CXL interconnection: The company will strengthen R&D investment in core underlying technologies such as SerDes, actively promote the iterative upgrading and market expansion of PCIe/CXL Retimer and CXL MXC products, and will continue to deepen the strategic cooperative relationship with cloud computing service providers, server OEM/ODM manufacturers, CPU/GPU manufacturers, and DRAM memory manufacturers; At the same time, relying on the core advantages of self-developed SerDes technology, we actively deploy new products such as PCIe Switch to provide customers with more comprehensive PCIe/CXL interconnection chip solutions. 3) Ethernet and optical interconnection: The company will make full use of the long-term accumulated technology and resource reserves in the field of memory interconnection and PCIe/CXL interconnection, actively explore the subdivision track suitable for the company's strategic layout, and flexibly use investment, cooperation or self-research and other ways to gradually and steadily promote the company's product layout in the field of Ethernet and optical interconnection, and inject new impetus into the company's sustainable development.

Investment suggestion: The company is a global leader in interconnection chips, with continuous product updates and iterations, and strong market competitiveness. At present, memory interface chips have shown restorative growth with the recovery of the downstream market, and the transportation capacity chips have benefited from the rapid expansion of the AI trend, and the company's performance is expected to maintain stable growth. According to the company's 2024 annual report and the judgment of the industry, we have adjusted the company's performance forecast, and it is expected that the company's net profit attributable to the parent company from 2025 to 2027 will be 2.165 billion yuan (the previous value was 2.017 billion yuan), 3.037 billion yuan (the previous value was 2.792 billion yuan), 3.634 billion yuan (new), and the PE corresponding to the closing price on April 11, 2025 will be 39.7X, 28.3X, and 23.6X, respectively. DDR5 penetration and AI industry trends are expected to drive the company's stable growth, and the company maintains its "Recommended" rating.

Risk warning: 1. The risk that the iteration of technical products is less than expected. If the company's product iteration cannot keep up with the upgrade pace of core devices such as memory and CPU, it may lead to the company's weak future growth. 2. The risk that downstream demand is less than expected. The company's products are mainly used in servers, and if the server market demand is weak, DDR5 penetration is slow, or AI implementation is delayed, the company may be adversely affected. 3. Risks of industrial ecological cooperation. The company's main interconnection chips are highly dependent on the ecological chain of the industrial chain, and if the degree of cooperation with upstream and downstream partners is not close enough, it may affect the launch and volume of the company's new products.