Investment Rating - Maintains a "Buy" rating with a target price of HKD 49.8, based on 19x 2024 forecasted P/E [1][2] Core Views - Strong H1 2024 performance with revenue up 42.1% YoY to RMB 291 million and net profit up 46.3% YoY to RMB 67 million [1] - Revenue growth driven by expanded product portfolio (over 500 models by H1 2024), deepened customer relationships, and distribution network expansion [1] - Gross margin declined to 51.3% in H1 2024 due to increased inventory write-down provisions, but core gross margin remained stable at 55.2% [1] - Net margin improved to 23.1% in H1 2024, compared to 22.4% in H1 2023 and 23.5% in 2023 [1] - Revenue expected to grow at 40.2% and 37.8% in 2024 and 2025, respectively, driven by product diversification and strong distributor relationships [2] Financial Performance - Revenue CAGR of 73.6% from 2020 to 2023, with product portfolio expanding from 8 models in 2020 to over 500 models by H1 2024 [2] - 90% of H1 2024 revenue came from distributors, up from 87.5% in 2023 [2] - Forecasted revenue for 2024 and 2025 at RMB 650 million and RMB 896 million, respectively, with net profit of RMB 146 million and RMB 210 million [3][8] - Gross margin expected to stabilize at 53%-55% from 2024 to 2026 [2] Valuation - Current 2024 and 2025 P/E ratios at 10x and 7x, respectively, considered highly attractive [2] - Target price implies a potential upside of 102.4% from the current price of HKD 24.6 [4] Industry and Market Position - Leading supplier of industrial-grade analog IC patterned wafers in China with proprietary EDA software and reusable IP library [1] - Strong R&D capabilities and execution by management team evidenced by rapid product portfolio expansion [2] Financial Projections - Forecasted sales revenue for 2024 and 2025 at RMB 650 million and RMB 896 million, with net profit of RMB 146 million and RMB 210 million [3][8] - Operating profit expected to grow at 36.1% and 42.5% in 2024 and 2025, respectively [3] - ROE projected to improve from 16.1% in 2024 to 22.6% in 2026 [3]

Revenue Growth - The company's revenue increased by 42.1% from RMB 204.4 million for the six months ended June 30, 2023, to RMB 290.6 million for the six months ended June 30, 2024[1]. - Revenue from customer contracts for the sale of simulation IC wafers reached RMB 290,554,000, up from RMB 204,422,000 in the previous period[10]. - For the six months ended June 30, 2024, the company achieved revenue of RMB 290.6 million, representing a year-on-year increase of 42.1% with a gross margin of 51.3%[28]. - Revenue from power management products was RMB 256.5 million, accounting for 88.3% of total revenue, while signal chain products generated RMB 34.1 million, making up 11.7%[30]. - Revenue from power management products rose by 42.8% from RMB 179.6 million to RMB 256.5 million, attributed to new product launches and increased customer demand[31]. - Revenue from signal chain products increased by 37.2% from RMB 24.8 million to RMB 34.1 million, benefiting from new product introductions and downstream demand growth[31]. - Sales to distributors grew by 55.4% from RMB 168.2 million to RMB 261.4 million, due to steady procurement increases from major distributors and the addition of new distributors[31]. Profitability - Gross profit increased by 31.9% from RMB 112.9 million to RMB 149.0 million, with a gross margin decrease from 55.2% to 51.3%[2]. - Profit before tax rose by 46.3% from RMB 45.9 million to RMB 67.1 million, mainly due to the substantial increase in sales revenue[3]. - The company's net profit for the period also increased by 46.3% from RMB 45.9 million to RMB 67.1 million[3]. - The adjusted net profit for the six months ended June 30, 2024, was RMB 67,116,000, an increase from RMB 56,644,000 for the same period in 2023, representing a growth of 18.8%[45]. - Other income and net gains surged by 202.8% from RMB 5.6 million to RMB 17.1 million, primarily from increased interest income and foreign exchange gains[36]. Expenses and Costs - Sales cost rose by 54.7% from RMB 91.5 million to RMB 141.6 million, primarily due to the significant increase in sales revenue during the reporting period[2]. - Research and development expenses grew by 23.3% from RMB 57.4 million to RMB 70.8 million, driven by the expansion of business scale and continuous improvement in profitability[3]. - Financing costs rose by 88.2% from RMB 1.8 million to RMB 3.4 million, mainly due to an increase in short-term bank loans[40]. - Employee costs increased to RMB 21,831,000 from RMB 26,784,000, with research and development expenses rising to RMB 70,812,000 from RMB 57,411,000[15]. Assets and Liabilities - Total assets as of June 30, 2024, amounted to RMB 1,264.4 million, compared to RMB 1,166.3 million as of December 31, 2023[6]. - The company's net asset value increased to RMB 905.3 million as of June 30, 2024, from RMB 838.2 million as of December 31, 2023[7]. - Trade receivables increased to RMB 130,230,000 as of June 30, 2024, compared to RMB 61,257,000 at the end of 2023[17]. - Trade and other payables amounted to RMB 239.3 million as of June 30, 2024, down from RMB 248.5 million as of December 31, 2023[24]. - The total outstanding bank loans increased from RMB 171.6 million as of December 31, 2023, to RMB 241.8 million as of June 30, 2024, primarily to support operational funding needs[56]. Corporate Governance and Dividends - The board of directors did not recommend the distribution of an interim dividend for the six months ended June 30, 2024[3]. - The company has complied with all applicable corporate governance codes and regulations during the reporting period, ensuring high standards of corporate governance practices[72]. - The interim results announcement has been published on the company's website and the Hong Kong Stock Exchange website[76]. Strategic Focus and Development - The company focused on high-end industrial-grade analog IC wafer business, expanding its customer base in the new energy vehicle sector[27]. - The company continues to expand its technology advantages through self-developed EDA tools and a rich IP library[29]. - The company plans to enhance its R&D capabilities by establishing a backend process R&D center to improve efficiency and reduce costs in new product development[70]. - The company aims to strengthen its core capabilities and accelerate new product R&D and EDA tool upgrades to enhance market share and sustainable development benefits for shareholders[71].

Investment Rating - The report initiates coverage on the company with a "Buy" rating and sets a target price of HKD 49.80, indicating a potential upside of 97.6% from the current price of HKD 25.20 [3][11]. Core Insights - The company is recognized as a leading supplier of analog IC patterned wafers in China, with a unique full-stack design platform that integrates EDA, IP, and design processes. This positions the company favorably in the industrial-grade analog IC market, which is expected to support long-term profitability [7][20]. - The company is projected to achieve a robust revenue growth rate of 38.0% from 2023 to 2026, with stable profit margins expected to maintain at 54% gross margin and 23% net margin in 2024/25 [7][11]. - The valuation appears attractive, with a projected P/E ratio of 10.3x for 2024/25 compared to the industry average of 30.8x for Hong Kong-listed peers [7][11]. Financial Overview - Revenue is expected to grow from RMB 353 million in FY22 to RMB 1,220 million by FY26, reflecting a compound annual growth rate (CAGR) of 38% [2]. - Gross margin is projected to remain stable, with estimates of 53.8% in FY24 and 54.3% in FY25 [2]. - Net profit is forecasted to increase from RMB 95.3 million in FY22 to RMB 305.2 million by FY26, with a CAGR of 45% [2]. Market Position and Strategy - The company holds a 1.7% market share in the analog IC patterned wafer market, ranking first in revenue according to Frost & Sullivan [7][20]. - The industrial-grade analog IC market is characterized as a long-tail market with diverse downstream demand and lower competition compared to consumer-grade markets. The market is expected to grow at a CAGR of 9.5% from 2024 to 2027, reaching RMB 242 billion [9][29]. - The company has established strong partnerships with distributors, with 87% of its revenue in 2023 coming from distribution channels, indicating a strategic approach to leverage partner resources for growth [32]. Competitive Advantages - The company possesses three key differentiators: being a leading supplier of analog IC patterned wafers, focusing on the industrial-grade analog IC market, and having the only full-stack analog IC design platform in China [22][20]. - The full-stack design platform enhances efficiency in IC design and wafer delivery, reduces geopolitical risks, and provides cost advantages [10][20]. - The company has developed over 400 models of industrial-grade analog IC patterned wafers, with a projected CAGR of 23.4% in product variety from 2023 to 2026 [7][20].

Investment Rating - The report initiates coverage on BaTeLab with a BUY rating and a target price (TP) of HK$49.8, based on a 19x 2024E P/E ratio [7][21][64]. Core Insights - BaTeLab is a leading provider of analog IC patterned wafers in China, focusing on the industrial-grade market, which has significant growth potential and high margins [7][20][21]. - The company has developed a unique full-stack design platform that integrates EDA, IP, and design, which enhances efficiency and reduces costs [7][21][62]. - BaTeLab's revenue is projected to grow at a CAGR of 38.0% from 2023 to 2026, with expected revenue reaching RMB1,220 million by 2026 [7][64]. Financial Analysis - Revenue growth from RMB353 million in 2020 to RMB464 million in 2023, with a CAGR of 74% [64]. - Net profit margin (NPM) is estimated to be 22.5% in 2024 and 23.5% in 2025, indicating stable profitability [21][64]. - Gross profit margin (GPM) is expected to remain around 54% from 2024 to 2026 [21][64]. Market Position - BaTeLab was the largest provider of analog IC patterned wafers in China by revenue in 2022, holding a 1.7% market share [7][20]. - The total addressable market (TAM) for industrial-grade analog ICs in China is projected to grow at a CAGR of 9.5%, reaching RMB242 billion by 2027 [20][21]. - The industrial-grade analog IC market is characterized by high fragmentation, with the top five players holding only 5.0% of the market share [20][52]. Business Strategy - BaTeLab's business model focuses on the industrial-grade market, which has less competition compared to consumer-grade markets, allowing for better margin maintenance [20][21]. - The company leverages partnerships with distributors, which accounted for 82.3% of total revenue in 1H23, to enhance growth while keeping operating costs low [20][21]. - The full-stack design platform allows BaTeLab to mitigate geopolitical risks and achieve cost advantages, enhancing its competitive position [21][62].

Financial Performance - For the fiscal year ending December 31, 2023, the company achieved revenue of approximately RMB 463.9 million, representing a year-on-year growth of about 31.6%[10]. - The gross profit for the same period was approximately RMB 257.1 million, with a gross margin of approximately 55.4%[10]. - The company's operating profit was approximately RMB 113.4 million, compared to RMB 98.5 million in 2022, indicating a solid performance[13]. - The company achieved a revenue of RMB 463.9 million in 2023, representing a year-on-year growth of 31.6%, with a gross margin of 55.4%[20]. - The company's revenue increased by 31.6% from RMB 352.5 million in 2022 to RMB 463.9 million in 2023, driven by the launch of new industrial products and strong demand in the new energy sector[32]. - Revenue from power management products rose by 38.5% from RMB 294.8 million in 2022 to RMB 408.3 million in 2023, attributed to new product launches and increased customer demand[33]. - Revenue from signal chain products decreased by 3.6% from RMB 57.7 million in 2022 to RMB 55.6 million in 2023, due to reduced demand for certain models[33]. - Revenue from sales to distributors increased by 43.5% from RMB 282.7 million in 2022 to RMB 405.7 million in 2023, as major distributors steadily increased their purchases[33]. - Gross profit rose by 29.0% from RMB 199.3 million in 2022 to RMB 257.1 million in 2023, while gross margin slightly decreased from 56.5% to 55.4%[35]. - The company's annual profit rose by 14.6% from RMB 95.3 million for the year ended December 31, 2022, to RMB 109.2 million for the year ended December 31, 2023, mainly due to increased revenue[47]. - Adjusted net profit (non-HKFRS measure) for the year ended December 31, 2023, was RMB 120.6 million, compared to RMB 95.3 million for the year ended December 31, 2022[48]. Assets and Liabilities - Total assets as of December 31, 2023, amounted to RMB 1,270.9 million, a significant increase from RMB 595.5 million in 2022[15]. - The total liabilities increased to RMB 432.7 million from RMB 199.7 million in the previous year, reflecting the company's growth strategy[15]. - Current assets increased by approximately 120.1% to RMB 1,166.3 million as of December 31, 2023, compared to RMB 529.9 million as of December 31, 2022[53]. - Cash and cash equivalents increased by approximately 239.0% to RMB 550.8 million as of December 31, 2023, from RMB 162.5 million as of December 31, 2022[53]. - The company's outstanding bank loans increased from RMB 95.5 million as of December 31, 2022, to RMB 171.6 million as of December 31, 2023, primarily to support operational funding needs[58]. - The capital debt ratio as of December 31, 2023, was approximately 21.8%, down from 25.8% as of December 31, 2022[52]. Research and Development - The company plans to enhance its R&D efforts and accelerate the development of new products and EDA tools in 2024[11]. - Research and development expenses increased by 40.4% from RMB 84.9 million for the year ended December 31, 2022, to RMB 119.1 million for the year ended December 31, 2023[43]. - The company continues to enhance its all-in-one simulation IC design platform, which is expected to significantly promote future business development[30]. - The company aims to leverage its proprietary EDA tools to promote the transformation of core technologies and increase market share[11]. Market and Industry Trends - The global analog chip market experienced a year-on-year decline of 8.9% in 2023, marking the lowest growth rate since 2011, with increased competition leading to price wars among domestic manufacturers[19]. - The integrated circuit industry in China saw a production increase of 6.9% in 2023, with a total output of 351.4 billion units[18]. - The company focuses on high-end industrial-grade analog IC pattern wafer business, continuously expanding its customer base in the new energy vehicle sector, which contributed to its rapid growth in performance during the reporting period[19]. Corporate Governance - The company has adopted the corporate governance code as per the listing rules and has complied with all applicable code provisions from the listing date to December 31, 2023[102]. - The board consists of nine members, including three executive directors, two non-executive directors, and four independent non-executive directors as of December 31, 2023[106]. - The company emphasizes transparency, integrity, and accountability in its corporate governance practices to ensure sustainable development and robust performance growth[100]. - The board has established four specialized committees, including the Audit Committee, Remuneration and Assessment Committee, Nomination Committee, and Strategic Committee to oversee specific aspects of the company's affairs[104]. - The company has mechanisms in place to ensure the independence of board members, including the ability to hire independent professional advisors[120]. - The board is responsible for ensuring that the financial statements fairly reflect the company's performance and cash flows for the year ending December 31, 2023[153]. Shareholder Relations - The company emphasizes effective communication with shareholders to strengthen investor relations and ensure timely disclosure of information[167]. - The company encourages shareholders to attend the annual general meeting and allows for proxy voting if they cannot attend[171]. - The company has no formal dividend policy or fixed dividend payout ratio, and no dividends were declared for the year ending December 31, 2023[166]. - The company will only distribute dividends from distributable profits after covering cumulative losses and legal reserves[168]. Risk Management - The company has established risk management procedures to minimize financial risks, including interest rate, credit, and liquidity risks[191]. - The internal audit department has been established to review the company's financial status, operational conditions, risk management, compliance monitoring, and internal controls[156]. - The company has implemented a whistleblowing policy for employees and other stakeholders to report concerns anonymously[160]. - The company has established anti-fraud and anti-bribery policies to prevent internal fraud and bribery[161]. Workforce and Diversity - As of December 31, 2023, the company's workforce comprises approximately 55.75% male employees and 44.25% female employees, focusing on candidates' abilities and experience rather than gender during recruitment[149]. - The company aims to increase the representation of female members on the board to at least 15% within three years post-listing, prioritizing female candidates in the selection process[148]. - The company has committed to enhancing gender diversity at all levels, including the board and senior management, by investing in training and development for female employees[147].

Financial Performance - The company's revenue increased by 31.6% from RMB 352.5 million in 2022 to RMB 463.9 million in 2023, driven by the launch of new industrial products and strong demand in the new energy sector[3]. - Gross profit increased by 29.0% from RMB 199.3 million in 2022 to RMB 257.1 million in 2023, with a slight decrease in gross margin from 56.5% to 55.4%[4]. - Profit before tax rose by 12.7% from RMB 96.8 million in 2022 to RMB 109.2 million in 2023, mainly due to the substantial increase in sales revenue[6]. - The annual profit increased by 14.6% from RMB 95.3 million in 2022 to RMB 109.2 million in 2023, attributed to the significant rise in sales[6]. - Basic earnings per share for 2023 were RMB 2.43, compared to RMB 2.12 in 2022, representing a growth of 14.6%[44]. - Adjusted net profit (non-HKFRS measure) for 2023 was RMB 1,206 million, compared to RMB 953 million in 2022, after adding back IPO expenses and share-based payments[92]. Expenses and Costs - Sales cost rose by 35.0% from RMB 153.2 million in 2022 to RMB 206.8 million in 2023, primarily due to the significant increase in sales revenue[4]. - Research and development expenses grew by 40.4% from RMB 84.9 million in 2022 to RMB 119.1 million in 2023, reflecting the company's expanding business scale and ongoing profitability improvements[6]. - Distribution costs increased by 80.6% from RMB 36 million in 2022 to RMB 65 million in 2023, mainly due to rising employee compensation and new expenses from the Shanghai branch[82]. - Administrative expenses rose by 17.6% from RMB 222 million in 2022 to RMB 261 million in 2023, driven by increased employee compensation and higher intermediary fees related to the IPO[83]. - Financing costs increased significantly to RMB 4,269,000 in 2023 from RMB 1,651,000 in 2022, reflecting higher interest expenses on loans and borrowings[33]. Assets and Liabilities - Cash and cash equivalents increased significantly from RMB 162.5 million in 2022 to RMB 550.8 million in 2023, indicating improved liquidity[16]. - Total assets less current liabilities rose from RMB 400.3 million in 2022 to RMB 844.2 million in 2023, reflecting strong asset growth[12]. - The company's equity increased from RMB 395.8 million in 2022 to RMB 838.2 million in 2023, demonstrating substantial growth in shareholder value[14]. - Total outstanding bank loans increased from RMB 955 million as of December 31, 2022, to RMB 1,716 million as of December 31, 2023, primarily to support operational funding needs[102]. - Trade and other payables increased to RMB 248,501,000 in 2023 from RMB 96,049,000 in 2022, marking a 158.1% rise[53]. Revenue Sources - Customer contract revenue from the sale of simulated IC pattern wafers increased to RMB 463,881,000 in 2023 from RMB 352,510,000 in 2022, representing a growth of 31.6%[26]. - Revenue from power management products rose by 38.5% to RMB 408.3 million, while revenue from signal chain products decreased by 3.6% to RMB 55.6 million[74]. - Major customers contributing over 10% of total revenue included Customer A with RMB 210,273,000 (up from RMB 156,094,000) and Customer B with RMB 195,222,000 (up from RMB 126,585,000) in 2023[30]. Market and Industry Trends - The integrated circuit (IC) industry in China produced 351.4 billion units in 2023, a year-on-year increase of 6.9%[58]. - The global analog chip market experienced a year-on-year decline of 8.9% in 2023, marking the lowest growth rate since 2011[59]. - The company is expanding its market share in the new energy vehicle sector, leveraging its core competencies in product and technology[60]. Corporate Governance and Future Plans - The company has maintained compliance with all applicable laws and regulations, with no significant violations reported as of December 31, 2023[118]. - The company plans to enhance its competitive advantages in technology, talent, sales, and quality, while expanding production capacity and high-end application areas in 2024[123]. - The company will regularly review and monitor its corporate governance practices to ensure compliance with high standards[126].