Investment Rating - The report reiterates a BUY rating for BaTeLab with an unchanged target price of HK$49.80, corresponding to a 20.4x 2024E P/E [2]. Core Insights - BaTeLab's management emphasizes the industrial market's lower R&D costs and long-tail characteristics, allowing for cost efficiency through proprietary EDA software and a reusable IP library [2]. - The company is focusing on patterned wafers, which are believed to provide higher marketing efficiency while keeping operational costs low [2]. - Management acknowledges concerns regarding high revenue reliance on distributor channels, stating that customer concentration is channel-specific and the actual customer base is diverse [2]. - Future revenue growth is expected to be driven by semiconductor localization, with plans to expand the product portfolio by approximately 100 SKUs annually [2]. - Management anticipates a gradual recovery in market demand and expects accelerated growth in the analog IC market over the next 5-10 years [2]. - The company's gross profit margin is projected to remain stable within the range of 53-55%, despite a lower-than-expected GPM of 51.3% in 1H24 due to increased inventory provisions [2]. Financial Summary - Revenue is forecasted to grow from RMB 464 million in 2023 to RMB 650 million in 2024, representing a year-on-year growth of 40.2% [3]. - The gross profit margin is expected to be 53.8% in 2024, down from 55.4% in 2023 [3]. - Operating profit is projected to increase from RMB 113 million in 2023 to RMB 154 million in 2024, with a year-on-year growth of 36.1% [3]. - Net profit is anticipated to rise from RMB 146.3 million in 2023 to RMB 210.5 million in 2024, reflecting a year-on-year growth of 43.9% [3]. - The company reported a P/E ratio of 10.8x for 2024E, which is considered attractive compared to the industry [2][3]. Market Position - BaTeLab's market capitalization is approximately HK$396.8 million, with a current share price of HK$26.45, indicating an upside potential of 88.3% to the target price [4]. - The company has a diverse shareholding structure, with the largest shareholders holding 53.5% and 39.5% of the shares [4]. - The stock has shown a 1-month performance of -3.5% and a 3-month performance of 7.7% [4].

Financial Performance - Revenue for the first half of 2024 reached RMB 290.6 million, a 42.1% increase year-over-year[14] - Gross profit margin stood at 51.3% for the first half of 2024[14] - Net profit for the first half of 2024 was RMB 67.1 million, compared to RMB 45.9 million in the same period last year[12] - Revenue increased by 42.1% from RMB 204.4 million in the first half of 2023 to RMB 290.6 million in the first half of 2024, driven by new industrial products and deeper customer engagement[18] - Gross profit rose by 31.9% from RMB 112.9 million in the first half of 2023 to RMB 149.0 million in the first half of 2024, while gross margin decreased from 55.2% to 51.3% due to inventory provisions[22] - Profit before tax increased by 46.3% from RMB 45.9 million in the first half of 2023 to RMB 67.1 million in the first half of 2024, driven by a significant rise in sales revenue[32] - Net profit for the period increased by 46.3% from RMB 45.9 million in the first half of 2023 to RMB 67.1 million in the first half of 2024, reflecting strong revenue growth[34] - Adjusted net profit (non-HKFRS measure) for the first half of 2024 was RMB 67.1 million, compared to RMB 56.6 million in the first half of 2023, after adjusting for listing expenses and share-based payments[35] - Revenue for the six months ended June 30, 2024, increased to RMB 290.554 million, up 42.1% from RMB 204.422 million in the same period last year[91] - Gross profit rose to RMB 148.959 million, a 31.9% increase compared to RMB 112.895 million in the previous year[91] - Operating profit grew to RMB 70.496 million, up 47.9% from RMB 47.660 million in the same period last year[91] - Net profit for the period reached RMB 67.116 million, a 46.4% increase from RMB 45.864 million in the previous year[91] - Net profit for the first half of 2024 was RMB 67,116 thousand, a 6.0% increase compared to RMB 63,294 thousand in the second half of 2023[95] Product and Sales Performance - Power management product sales grew by 42.8% from RMB 179.6 million in the first half of 2023 to RMB 256.5 million in the first half of 2024, supported by new product launches and customer demand[19] - Signal chain product sales increased by 37.2% from RMB 24.8 million in the first half of 2023 to RMB 34.1 million in the first half of 2024, due to new product introductions and downstream demand recovery[20] - Distributor sales surged by 55.4% from RMB 168.2 million in the first half of 2023 to RMB 261.4 million in the first half of 2024, driven by increased purchases from major distributors and new distributor partnerships[20] - The H770 platform, focused on high-voltage and high-current products, contributed over 30% of total revenue, with strong performance in the new energy sector[16] - The C280 platform, featuring boost-type micro-modules, saw a 70% year-over-year revenue increase due to its widespread use in power-sensitive systems[16] - Revenue from sales of analog IC patterned wafers grew to RMB 290,554 thousand in the first half of 2024, a 42.1% increase compared to RMB 204,422 thousand in the same period of 2023[99] Gross Margin and Cost Analysis - Power management product gross margin declined from 54.5% in the first half of 2023 to 50.6% in the first half of 2024, primarily due to inventory provision impacts[24] - Signal chain product gross margin decreased from 60.7% in the first half of 2023 to 56.3% in the first half of 2024, also influenced by inventory provisions[25] - Distribution costs increased by 3.1% from RMB 2.9 million in the first half of 2023 to RMB 3.0 million in the first half of 2024, primarily due to the company's business model of selling to distributors[27] - Administrative expenses rose by 56.8% from RMB 11.6 million in the first half of 2023 to RMB 18.3 million in the first half of 2024, driven by increased employee compensation and higher depreciation on leased properties[29] - R&D expenses grew by 23.3% from RMB 57.4 million in the first half of 2023 to RMB 70.8 million in the first half of 2024, with material costs for R&D increasing by RMB 23.3 million, a 71.3% year-over-year growth[30] - Financing costs surged by 88.2% from RMB 1.8 million in the first half of 2023 to RMB 3.4 million in the first half of 2024, mainly due to an increase in short-term bank loans[31] - Research and development expenses for the six months ended June 30, 2024, were RMB 70,812 thousand, compared to RMB 57,411 thousand for the same period in 2023[106] Balance Sheet and Financial Position - Total assets as of June 30, 2024, were RMB 1,396.1 million, up from RMB 1,270.9 million at the end of 2023[12] - The company's total liabilities as of June 30, 2024, were RMB 490.8 million, compared to RMB 432.7 million at the end of 2023[12] - The company's equity as of June 30, 2024, was RMB 905.3 million, up from RMB 838.2 million at the end of 2023[12] - The company's current assets increased by 8.4% to RMB 1,264.4 million as of June 30, 2024, driven by increases in inventory, pledged bank deposits, and cash and cash equivalents[44] - Cash and cash equivalents decreased by 12.3% to RMB 483.3 million as of June 30, 2024, due to increased prepayments for goods as the company expanded[44] - The company's capital expenditures for the six months ended June 30, 2024, were RMB 32.0 million, compared to RMB 5.9 million in the same period last year, primarily for property, plant, and equipment[45] - The company's inventory increased to RMB 239.1 million as of June 30, 2024, up from RMB 218.1 million at the end of 2023, reflecting business growth and market demand[55] - Trade receivables rose to RMB 130.2 million as of June 30, 2024, from RMB 61.3 million at the end of 2023, due to increased revenue and extended credit terms for key customers[56] - Prepayments increased to RMB 354.2 million as of June 30, 2024, from RMB 261.3 million at the end of 2023, driven by higher demand for raw materials as the company expanded[57] - The company's bank loans increased to RMB 241.8 million as of June 30, 2024, from RMB 171.6 million at the end of 2023, to support daily operations and business expansion[49] - The company has unused bank financing facilities of RMB 454.6 million as of June 30, 2024[49] - Property, plant, and equipment increased to RMB 65.8 million as of June 30, 2024, from RMB 62.3 million at the end of 2023, due to the purchase of new R&D equipment[53] - Total assets as of June 30, 2024, stood at RMB 1.264 billion, compared to RMB 1.166 billion as of December 31, 2023[92] - Inventory increased to RMB 239.050 million as of June 30, 2024, from RMB 218.131 million as of December 31, 2023[92] - Cash and cash equivalents decreased to RMB 483.293 million as of June 30, 2024, from RMB 550.838 million as of December 31, 2023[92] - Total equity increased to RMB 905,345 thousand as of June 30, 2024, up from RMB 838,229 thousand at the beginning of the year, driven by a net profit of RMB 67,116 thousand for the six-month period[95] - Operating cash flow was negative at RMB (91,897) thousand for the first half of 2024, compared to a positive RMB 50,774 thousand in the same period of 2023[96] - Cash and cash equivalents decreased by RMB 65,233 thousand to RMB 483,293 thousand as of June 30, 2024, impacted by negative operating cash flow and foreign exchange rate effects[96] - The company raised RMB 104,321 thousand from loans and borrowings during the first half of 2024, significantly higher than the RMB 11,858 thousand raised in the same period of 2023[96] - Investment activities used RMB 32,037 thousand in the first half of 2024, primarily for the purchase of property, plant, and equipment, compared to RMB 5,829 thousand in the same period of 2023[96] - The company completed its IPO on the Hong Kong Stock Exchange on December 28, 2023, raising RMB 323,241 thousand, which contributed to the increase in share capital and share premium[95] - The company's basic earnings per share for the six months ended June 30, 2024, were RMB 1.12, based on a profit attributable to ordinary equity shareholders of RMB 67,116 thousand and a weighted average number of ordinary shares of 60,000 thousand[109] - The company acquired property, plant, and equipment worth RMB 5,722 thousand during the six months ended June 30, 2024, compared to RMB 3,862 thousand in the same period in 2023[110] - Inventory as of June 30, 2024, was RMB 239,050 thousand, up from RMB 218,131 thousand as of December 31, 2023[113] - The cost of inventory recognized as an expense and included in profit or loss for the six months ended June 30, 2024, was RMB 197,327 thousand, compared to RMB 123,587 thousand for the same period in 2023[114] - Trade receivables (net of impairment) increased to RMB 130,230 thousand as of June 30, 2024, up from RMB 61,257 thousand as of December 31, 2023[115] - Prepayments to suppliers rose to RMB 354,163 thousand as of June 30, 2024, compared to RMB 261,135 thousand as of December 31, 2023[116] - Cash and cash equivalents decreased to RMB 483,293 thousand as of June 30, 2024, down from RMB 550,838 thousand as of December 31, 2023[119] - Bank loans (due within one year or on demand) increased to RMB 241,771 thousand as of June 30, 2024, up from RMB 171,601 thousand as of December 31, 2023[120] - Trade payables and notes payable (within 3 months) amounted to RMB 104,529 thousand as of June 30, 2024, down from RMB 115,967 thousand as of December 31, 2023[121] - Capital commitments not provided for in the financial statements stood at RMB 66,364 thousand as of June 30, 2024, up from RMB 720 thousand as of June 30, 2023[124] R&D and Innovation - The company's self-developed EDA tools and reusable IP library enhance its competitive edge[15] - The company is expanding its R&D capabilities by establishing a backend process R&D center to improve efficiency and reduce costs[64] - The company is investing in R&D for analog AI computing and upgrading EDA tools to enhance product development[64] - R&D expenses grew by 23.3% from RMB 57.4 million in the first half of 2023 to RMB 70.8 million in the first half of 2024, with material costs for R&D increasing by RMB 23.3 million, a 71.3% year-over-year growth[30] - Research and development expenses for the six months ended June 30, 2024, were RMB 70,812 thousand, compared to RMB 57,411 thousand for the same period in 2023[106] Market Expansion and Customer Base - The company has expanded its customer base, particularly in the new energy vehicle sector[13] - The company is entering new markets such as new energy vehicle thermal management, current sensors, and onboard chargers, aiming to increase market share[64] - 10% of the net proceeds (HKD 35.4 million) are allocated to expanding the customer base and strengthening customer relationships, with expected utilization by December 31, 2028[81] Risk Management - The company faces market risks, operational risks, investment risks, talent retention risks, financial risks, and foreign exchange risks, which are managed through various risk management procedures[37][38][39][40][41][42] Capital Management and Financing - The company's capital management aims to maintain a healthy capital structure, with a capital gearing ratio of 27.6% as of June 30, 2024, up from 25.1% in the same period last year[43] - The company's bank loans increased to RMB 241.8 million as of June 30, 2024, from RMB 171.6 million at the end of 2023, to support daily operations and business expansion[49] - The company has unused bank financing facilities of RMB 454.6 million as of June 30, 2024[49] - The global offering of H shares raised a net amount of approximately HKD 354.1 million, with an issue price of HKD 27.47 per share[79] - 30% of the net proceeds (HKD 106.2 million) are allocated to enhancing R&D and innovation capabilities, with expected utilization by December 31, 2028[81] - 20% of the net proceeds (HKD 70.8 million) are allocated to strategic investments and/or acquisitions, with HKD 27.1 million already utilized and HKD 43.7 million remaining[81] - 20% of the net proceeds (HKD 70.8 million) are allocated to investing in R&D infrastructure and upgrading R&D centers, with expected utilization by December 31, 2028[81] - 10% of the net proceeds (HKD 35.4 million) are allocated to developing mixed-signal IC product lines, with expected utilization by December 31, 2028[81] - 10% of the net proceeds (HKD 35.4 million) are allocated to expanding the customer base and strengthening customer relationships, with expected utilization by December 31, 2028[81] - 5% of the net proceeds (HKD 17.7 million) are allocated to upgrading R&D technology, with expected utilization by December 31, 2028[81] - 5% of the net proceeds (HKD 17.7 million) are allocated to establishing sales centers, with expected utilization by December 31, 2028[81] - The company raised RMB 104,321 thousand from loans and borrowings during the first half of 2024, significantly higher than the RMB 11,858 thousand raised in the same period of 2023[96] Employee and Management - The company has 115 full-time employees as of June 30, 2024, with 69 in R&D, 10 in sales and marketing, and 34 in business operations and administration[60] - Employee costs for the six months ended June 30, 2024, were approximately RMB 21.2 million, compared to RMB 16.3 million for the same period in 2023[61] - The company provides competitive salaries, performance bonuses, and incentives to attract and retain qualified employees[61] - The company offers a comprehensive training program, including a 2-3 week special training project for R&D employees to familiarize them with project management[62] - The company maintains a stable core management team and has not experienced any significant non-compliance with applicable laws and regulations as of June 30, 2024[63] - Total remuneration for key management personnel was RMB 2,517 thousand for the six months ended June 30, 2024, compared to RMB 2,147 thousand for the same period in 2023[125] Shareholder and Equity Information - As of June 30, 2024, the company's directors and senior executives hold significant equity interests, with the largest being 31.41% of domestic unlisted shares[70] - Zhang Guangping holds 15,436,645 domestic unlisted shares, representing 34.30% of the relevant category and 25.73% of the total share capital[71] - Li Yi holds 252,800 domestic unlisted shares, representing 0.56% of the relevant category and 0.42% of the total share capital[71] - Kong Jianhua holds 2,846,352 domestic unlisted shares through a controlled entity, representing 6.33% of the relevant category and 4.74% of the total share capital[71] - Zhang Jingwen holds 15,436,645 domestic unlisted shares through spousal rights, representing 34.30% of the relevant category and 25.73% of the total share capital[74] - Beckwatt Electronics holds 8,753,678 domestic unlisted shares, representing 19.45% of the relevant category and 14.59% of the total share capital[74] - Beckwatt Partnership holds 5,380,535 domestic unlisted shares, representing 11.96% of the relevant category and 8.97% of the total share capital[74] - Suzhou Rongxiang Beiying Venture Capital Partnership holds 2,846,352 domestic unlisted shares, representing 6.33% of the relevant category and 4.

Investment Rating - The report maintains a BUY rating on BaTeLab with an unchanged target price (TP) of HK$49.8, based on a 19x 2024E P/E ratio [1][3]. Core Insights - BaTeLab reported strong 1H24 earnings with revenue growth of 42.1% YoY to RMB291 million, driven by new product launches, strengthened partnerships, and an expanded distribution network [1]. - Net profit for 1H24 increased by 46.3% YoY to RMB67 million, with revenue and net profit accounting for 45% and 46% of full-year estimates, respectively [1]. - The company is recognized as a leading provider of industrial-grade analog IC patterned wafers in China, supported by proprietary EDA tools and a reusable IP library [1]. Financial Summary - Revenue projections for FY24 are set at RMB650 million, reflecting a YoY growth of 40.2%, with further growth expected at 37.8% in FY25 and 36.1% in FY26 [2][8]. - Gross margin is expected to stabilize between 53% and 55% for 2024-2026, despite a decline to 51.3% in 1H24 due to higher inventory provisions [1][2]. - The company’s operating profit for FY24 is estimated at RMB154.4 million, with a net profit of RMB146.3 million, indicating a YoY growth of 34% [2][8]. Market Position and Strategy - BaTeLab has expanded its SKU offerings to over 500 in 1H24, confirming its R&D capabilities and management execution [1]. - The company has strengthened its partnerships with distributors, with 90% of revenue coming from distributor sales in 1H24, up from 87.5% in FY23 [1]. - The stock is currently trading at a P/E of 10x for 2024E, which is considered attractive compared to its semiconductor peers [1][3].

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].