Core Viewpoint - Wuhan Xinxin Integrated Circuit Co., Ltd. (Xinxin Co.) has suspended its IPO process on the Sci-Tech Innovation Board due to expired financial documents, requiring updates for resumption of review [1][3] Financial Performance - Xinxin Co. plans to raise 4.8 billion yuan through its IPO and has shown continuous revenue growth from 2021 to 2024, with revenues of 3.138 billion yuan, 3.507 billion yuan, 3.815 billion yuan, and 3.146 billion yuan respectively [3][4] - The company's net profit has fluctuated significantly during the same period, with figures of 639 million yuan, 717 million yuan, 394 million yuan, and 138 million yuan, indicating a 45.05% year-on-year decline in 2023 [3][4] Revenue Sources - A significant portion of Xinxin Co.'s net profit in 2023 and the first three quarters of 2024 is derived from technology licensing income from an unnamed related party referred to as "Company Two" [7][9] - The contribution of this technology licensing income to net profit is substantial, with 2.84 billion yuan and 1.71 billion yuan reported for 2023 and the first three quarters of 2024, respectively [9] Industry Context - The global semiconductor industry is currently in a downturn, with comparable companies like SMIC and Hua Hong experiencing significant declines in net profit, indicating a challenging market environment [6] - Xinxin Co. has acknowledged that its net profit fluctuations are influenced by market demand, capacity utilization, R&D investments, and foreign exchange losses [6] Client Relationships - Xinxin Co.'s major clients include Hengshuo Co., which has seen a decline in procurement amounts, indicating potential shifts in client relationships [13][14] - The company has ended its capacity binding agreement with Hengshuo Co., which may impact future revenue streams [14][15] Related Party Transactions - Xinxin Co. has significant transactions with another related party, referred to as "Company Three," including a loan of 700 million yuan and various rental agreements [16][17] - There are indications that "Company Three" may be Yangtze Memory Technologies Co., Ltd., which has historical ties to Xinxin Co. [19][20]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 43.0 HKD [7][8]. Core Views - The company achieved Q1 2025 revenue of 541 million USD, reflecting a year-over-year increase of 17.6% and a quarter-over-quarter increase of 0.3%, primarily driven by increased wafer shipments [16][20]. - The gross margin for Q1 2025 was 9.2%, up 2.8 percentage points year-over-year but down 2.2 percentage points quarter-over-quarter due to depreciation from new production lines [16][20]. - For Q2 2025, the company guides revenue between 550-570 million USD, with a gross margin forecast of 7-9%, mainly impacted by depreciation [21]. Summary by Sections Revenue and Profitability - Q1 2025 revenue reached 541 million USD, with wafer shipments of 1.231 million pieces, a year-over-year increase of 20.0% [16][20]. - The company expects full-year revenue growth driven by sustained capacity utilization and an increase in 12-inch capacity [16][18]. Capacity and Production - The production capacity utilization rate was 102.7% in Q1 2025, with the second 12-inch production line expected to ramp up steadily [2][21]. - The company aims to shorten ramp-up time and increase shipment volumes to stabilize gross margins [2]. Pricing and ASP - The average selling price (ASP) in Q1 2025 decreased by 0.9% quarter-over-quarter, but the company anticipates stable pricing for the year, with potential increases in 12-inch prices [3][5]. - The company believes that 2024 will be the price low point, with opportunities for price increases if supply-demand conditions tighten [3]. Segment Performance - Q1 2025 revenue from analog and power management grew by 12% quarter-over-quarter, benefiting from increased demand for power management chips [4][26]. - The 12-inch wafer revenue reached 310 million USD in Q1 2025, a year-over-year increase of 40.8% [24]. Financial Forecast - The report maintains revenue forecasts for 2025, 2026, and 2027 at 2.168 billion USD, 2.453 billion USD, and 2.739 billion USD respectively, with net profit estimates of 52.31 million USD, 82.49 million USD, and 97.02 million USD [5][18][19]. - The target price of 43.0 HKD is based on a 1.5 times price-to-book ratio for 2025 [5][29].