Investment Rating - The report maintains a "Strong Buy" rating for the company, indicating an expectation of outperforming the benchmark index by over 20% in the next six months [2][25]. Core Views - The company has shown continuous improvement in operational quality and successful expansion of customized storage clients. In the first half of 2025, the company achieved a revenue of 4.15 billion yuan, a year-on-year increase of 15%, and a net profit attributable to shareholders of 575 million yuan, up 11.31% year-on-year [2][10]. - The demand for NOR Flash in the consumer sector has significantly increased, and the company is making steady progress in expanding its customized storage business in various fields such as AI mobile phones, AI PCs, and automotive applications [10]. Financial Performance Summary - For the first half of 2025, the company reported: - Revenue: 4.15 billion yuan (YoY +15%) - Net profit attributable to shareholders: 575 million yuan (YoY +11.31%) - Non-recurring net profit: 544 million yuan (YoY +14.99%) [2][10]. - In Q2 2025, the company achieved: - Revenue: 2.24 billion yuan (YoY +13.09%, QoQ +17.4%) - Net profit attributable to shareholders: 341 million yuan (YoY +9.17%, QoQ +45.27%) [2][10]. Future Financial Projections - The company is projected to achieve the following financial metrics: - Total revenue (million yuan): 7,356 in 2024, 9,755 in 2025, 12,158 in 2026, and 15,250 in 2027 - Net profit attributable to shareholders (million yuan): 1,103 in 2024, 1,559 in 2025, 2,153 in 2026, and 2,636 in 2027 - Earnings per share (yuan): 1.66 in 2024, 2.35 in 2025, 3.24 in 2026, and 3.97 in 2027 [4][10]. Market Position and Strategy - The company is focusing on increasing its market share and has successfully captured opportunities in various sectors, including automotive, consumer electronics, and computing. The strategy emphasizes customized storage solutions and leveraging the growing demand in AI-related applications [10].

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company, Zhaoyi Innovation, is a leading domestic player in storage and MCU sectors, benefiting from a platform-based layout that supports its growth [4][12] - The company's revenue has shown a compound annual growth rate (CAGR) of 22.45% from 1.189 billion to 7.356 billion from 2015 to 2024, while net profit has grown from 0.158 billion to 1.103 billion with a CAGR of 24.11% [4][26] - The storage market is expanding due to the growth of edge AI and automotive trends, providing opportunities for domestic manufacturers as global competitors withdraw from niche storage markets [4][41] - The MCU business is positioned as a leader in the domestic 32-bit MCU market, with significant investments planned for automotive electronics [4][41] Summary by Sections 1. Company Overview - Zhaoyi Innovation was established in 2005 and listed on the Shanghai Stock Exchange in 2016, adopting a fabless production model that focuses on IC design while outsourcing manufacturing [4][12] - The company has diversified its product offerings from NOR Flash to include DRAM, NAND, and MCU, achieving a leading position in the domestic market [4][12][16] 2. Storage Business - The global semiconductor storage market is expanding, driven by edge AI and automotive trends, with Zhaoyi Innovation's comprehensive layout in storage products [4][41] - The company has developed a rich product line in specialized storage, ranking among the top ten globally in NOR Flash, SLC NAND Flash, and niche DRAM [4][41] 3. MCU Business - Zhaoyi Innovation is the domestic leader in 32-bit MCUs, with a projected revenue of approximately 231 million USD from MCU sales in 2024, ranking eighth globally [4][41] - The company is enhancing its automotive electronics capabilities with new high-performance MCU products and significant investments in R&D [4][41] 4. Financial Performance - The company reported a revenue of 7.356 billion in 2024, a year-on-year increase of 27.69%, and a net profit of 1.103 billion, reflecting a substantial recovery from previous downturns [4][27][31] - The revenue structure shows that storage chips and MCUs account for over 90% of total revenue, with storage chips contributing 70.6% [4][31] 5. R&D and Innovation - Zhaoyi Innovation has significantly increased its R&D investment, with expenses rising from 208 million to 1.122 billion from 2018 to 2024, representing a CAGR of 32.43% [4][37] - The company holds over 1,059 authorized patents, showcasing its commitment to innovation and technology leadership in the semiconductor industry [4][37]

Summary of Semiconductor Design Industry Conference Call Industry Overview - The domestic semiconductor design industry is characterized by both domestic demand and growth potential, with a low localization rate indicating significant future growth opportunities [3][12] - The analog chip market in mainland China is approximately $5 billion, with a potential for domestic substitution of $2-2.5 billion, presenting a substantial market opportunity for local companies [4] Key Companies and Performance - Leading companies such as Shengbangnaxin and Sirepu are expected to exceed performance expectations as downstream clients accelerate the adoption of domestic supply chains [4] - Companies like Hengxuan Technology and Lexin reported excellent performance in Q1 2025, with continued growth anticipated in Q2, benefiting from the market for AI toys and AI glasses [6] - Zhaoyi Innovation and Lanke Technology are central to the storage chain, with strong Q1 performance driven by NOR Flash volume and niche DRAM price increases, indicating a positive outlook for future earnings [7] Market Trends and Growth Drivers - The analog chip industry is in a deterministic growth cycle, with significant potential for domestic companies to capture market share as localization increases [5] - The SoC design chain is growing alongside terminal product innovations, with companies like Hengxuan and Lexin positioned well in emerging markets [6] - Wanqi Company is benefiting from the increasing penetration of DDR5 technology and ongoing developments in AI computing capabilities, including PCIe AI computing chips [8] Custom Storage Solutions - Zhan Yu Company excels in customized storage solutions, offering high bandwidth, low power consumption, and competitive pricing, which aligns with the growth of end-side NPU and SoC products [9] - Zhaoyi Innovation's short-term prospects are bolstered by increased storage capacities in AI PCs and headphones, with a focus on customized storage for AI applications [10][11] Future Outlook - The semiconductor design industry's future development logic revolves around self-sufficiency and innovation at the end-side, with key players including Naxin Micro, Shengbang Micro, and Sirepu focusing on self-controlled logic [12] - The growth of AI-related products and wearable devices is expected to drive demand for SoC, NPU, and customized storage solutions, with companies like Hengxuan, Zhaoyi Innovation, and Ruixinwei positioned to benefit [12]

Summary of the Conference Call for Zhaoyi Innovation Company Overview - **Company**: Zhaoyi Innovation - **Industry**: Semiconductor, specifically focusing on Flash memory, DRAM, and MCU products Key Financial Performance - **Q1 2025 Revenue**: Increased by 17.3% year-on-year to 1.909 billion CNY, and up 11.9% quarter-on-quarter - **Net Profit**: Grew by 14.6% year-on-year to 230 million CNY - **Gross Margin**: 37.44%, a slight decrease of 0.7 percentage points due to intensified competition in low-end niche products [2][4] Business Segments Performance Flash Business - **Growth Drivers**: Benefited from national subsidy policies and increased demand for NOR Flash due to AI development - **Market Expansion**: Actively pursuing opportunities in AI glasses and AI PCs, while increasing penetration in the domestic server market and expanding into Europe and Japan [2][5][6] DRAM Business - **Market Conditions**: Intense competition in the niche DRAM market, but signs of marginal improvement since March 2025 as major overseas manufacturers exit the niche market, leading to price increases for some products - **Revenue Growth Expectation**: Anticipated significant growth in niche DRAM revenue, projected at around 40% [2][7][10] MCU Business - **Strong Q1 Performance**: Revenue driven by domestic subsidies and export demand from certain clients - **Strategic Focus**: Emphasizing large customer strategies in photovoltaic, industrial control, and white goods sectors, while leveraging opportunities from AI developments [2][8][9] Market Trends and Strategic Initiatives - **Niche DRAM Market**: Observing a shift as major players move towards advanced products like DDR5, with expectations of price recovery in the niche market due to reduced supply and low inventory levels [11][21] - **MCU and Analog Products**: Plans to enhance product offerings through internal development and acquisitions, focusing on power management and AI MCU applications [10][25] Future Outlook - **2025 Revenue Guidance**: The company expects continued growth across all product lines, driven by market recovery, new product launches, and increased market share [18] - **NOR Flash and AI Integration**: Anticipating robust growth in NOR Flash demand from AI applications, particularly in smart glasses and AI PCs, with a focus on increasing capacity requirements [28][29] Additional Insights - **Supply Chain Resilience**: The company has established dual headquarters and overseas supply chain partnerships to mitigate external risks, particularly in light of ongoing US-China trade tensions [4] - **Automotive Sector**: The company is expanding its automotive MCU product line, aiming for higher value per vehicle and targeting TIER One and OEM customers [15][16] Conclusion Zhaoyi Innovation is positioned to capitalize on growth opportunities in the semiconductor industry, particularly in Flash memory and MCU segments, while navigating competitive challenges in the DRAM market. The company's strategic initiatives and market expansion efforts are expected to drive significant revenue growth in 2025 and beyond.