Dosilicon(688110) 东吴证券·2024-08-05 07:30Investment Rating - Buy (First Coverage) [1] Core Views - The company is a leading domestic storage chip design company, focusing on the R&D, design, and sales of niche NAND/NOR/DRAM chips. It has achieved steady growth from 2017 to 2022, with 2023 revenue and net profit at 531 million yuan and -306 million yuan, respectively. The storage industry's downturn cycle ended in late 2023, and prices for niche storage products have bottomed out in Q2 2024, with DRAM products leading the price increase [2] - The company is advancing the development of SLC NAND Flash advanced processes, with significant advantages in domestic substitution. The global SLC NAND Flash market is expected to reach 9 billion in 2021, accounting for 9.5% of the total DRAM market. Overseas manufacturers have announced their exit from the DDR3 market, creating space for domestic substitution. The company has stable supply chain cooperation in the niche market and is developing LPDDR series products [2] Financial Forecasts and Valuation - Revenue is expected to grow from 711.9 million yuan in 2024E to 1,215.86 million yuan in 2026E, with a CAGR of 25.9% [1] - Net profit is projected to recover from 4.17 million yuan in 2024E to 245 million yuan in 2026E, with a significant turnaround from the -306.25 million yuan loss in 2023 [1] - EPS is forecasted to increase from 0.01 yuan in 2024E to 0.55 yuan in 2026E [1] Product and Market Analysis - The company focuses on small and medium-capacity storage chips, with a diversified product layout including DRAM, NAND, NOR, and MCP. It is one of the few domestic companies capable of providing complete solutions for major storage chips [29] - The company's SLC NAND Flash products cover capacities from 512Mb to 32Gb, with ongoing development of 1xnm processes. It is a strong competitor in the domestic market, with potential to gain market share through domestic substitution [2] - The niche DRAM market is expected to benefit from the exit of overseas manufacturers, with the company well-positioned to capitalize on this trend through its stable supply chain and ongoing development of LPDDR products [2] Industry Trends - The global SLC NAND Flash market is projected to grow at a CAGR of 6.8% from 2019 to 2024, driven by increasing demand from emerging applications such as IoT, consumer electronics, and automotive electronics [2] - The niche DRAM market is expected to see price increases due to reduced supply from major manufacturers exiting the DDR3 market, with the company poised to benefit from this trend [2] - The NOR Flash market is also expanding, with the company focusing on medium and large-capacity products, which are expected to benefit from growing demand in 5G base stations, automotive electronics, and other applications [2] Competitive Advantages - The company has a stable and reliable supply chain, with close cooperation with international leading manufacturers such as Intel, Samsung, and SK Hynix [52] - It has a strong R&D focus, with significant investments in developing advanced processes for SLC NAND, NOR Flash, and DRAM products. The company's R&D expenses accounted for 46% of revenue in Q1 2024 [47] - The company's products have passed AEC-Q100 certification, making them suitable for automotive applications, which is a growing market for storage chips [49] Future Outlook - The company is expected to benefit from the recovery in the storage industry, with improving profitability and market share gains in both domestic and international markets [2] - Continued investment in R&D and process innovation will help the company maintain its competitive edge in the rapidly evolving storage chip market [47] - The company's focus on niche markets and domestic substitution positions it well to capitalize on the ongoing shifts in the global storage industry [2]