Price Trends in Storage Market - The first round of price increases in the storage market began in early April, initiated by SanDisk, with a second round of price hikes starting in September [1][2] - SanDisk announced a price increase of over 10% for all products, effective from September 5, with plans for regular price evaluations and potential further adjustments [2] - Micron also announced a price increase of 20%-30% for its storage products, halting quotes for all DDR4, DDR5, LPDDR4, and LPDDR5 products from September 12 [3] Market Dynamics - The demand from cloud service providers (CSPs) is driving the current price increases in the storage market [3] - The DDR4 and LPDDR4X markets have seen significant price increases due to supply-demand imbalances caused by major manufacturers reducing production [3] - The AI server and data center applications are pushing the demand for DDR5 and HBM, with predictions of a 65% year-on-year increase in HBM shipments by 2025 [4] Future Outlook - The enterprise SSD market is expected to see significant growth, with NAND flash and DRAM contract prices projected to rise by 15%-20% in Q4 2025 due to strong AI demand [7] - The shortage of traditional HDDs is leading cloud service providers to shift their data storage needs to high-capacity SSDs [7] - Companies like Alibaba, Baidu, and Tencent are significantly increasing their capital expenditures on AI and cloud infrastructure, indicating a robust demand for enterprise SSDs [8][9][10] Domestic Market Opportunities - The domestic storage industry is poised for growth, with companies that can secure stable, high-quality supply chains likely to benefit from the ongoing demand and price increases [12] - Companies like Gigadevice are targeting a one-third market share in the niche DRAM segment, with expectations of continued price increases [13] - Companies such as Changjiang Storage and JHICC are focusing on DDR5 and enterprise SSDs, with advancements in technology and local service positioning them favorably in the market [14][15][18]

Market Overview - The global NOR Flash market revenue is expected to exceed $2.6 billion by 2025, with applications divided into four main categories: PC (approximately 13%), automotive (approximately 21%), industrial (approximately 27%), and consumer (over 30%) [2] - Emerging consumer applications, including AI headphones, glasses, and toys, show significant demand growth, making them the most prosperous sector [2] - AI server shipments have increased significantly, with strong price support, while demand for AI PCs, automotive electronics, and industrial sectors (non-AI server) has also risen considerably [2] Competitive Landscape - Domestic AI server manufacturers are shifting from "copying" to self-replacement, with an expected replacement share of around 20% this year, indicating a clear trend of replacing Taiwanese manufacturers [2] - This shift presents new market opportunities for A-share storage chip manufacturers such as Zhaoyi Innovation, Beijing Junzheng, Fudan Microelectronics, Dongxin Co., Puran Co., Jucheng Co., and Hengsuo Co. [2] R&D Investment - Zhaoyi Innovation leads in R&D investment with 567.68 million yuan, followed by Fudan Microelectronics with 508.61 million yuan, and Beijing Junzheng with 348.28 million yuan [5] - In terms of R&D expenses as a percentage of revenue, Dongxin Co. ranks first at 30.74%, followed by Fudan Microelectronics at 27.66%, and Hengsuo Co. at 24.58% [7] R&D Personnel - Zhaoyi Innovation has the highest number of R&D personnel at 1,481, followed by Fudan Microelectronics with 1,113, and Beijing Junzheng with 760 [8] Product Development - Zhaoyi Innovation has a diverse product matrix including NOR Flash, SLC NAND Flash, and niche DRAM, covering various applications in consumer electronics, industrial, communications, and automotive sectors [9] - The company launched a dual-voltage supply SPI NOR Flash product for 1.2V SoC applications, enhancing its strategic layout in embedded storage solutions [10] - Beijing Junzheng's storage chip categories include SRAM, DRAM, and Flash, with a strong presence in automotive and industrial markets [11] - Fudan Microelectronics has a comprehensive product layout in non-volatile memory, with new SONOS platform products entering mass production [12] - Puran Co. offers a full range of EEPROM and NOR Flash products, catering to various applications including smartphones and AI devices [13] - Hengsuo Co. is expanding its product line to include DRAM memory products and has launched DDR4 products in 2025 [15] - Dongxin Co. has achieved mass production of its 1xnm flash memory products and is continuously optimizing its design and process [16]

Investment Rating - The report initiates coverage with a "Buy" rating for the company, citing its leadership in diversified chip design and a projected PE of 70X for 2025, which is below the average of comparable companies, indicating a potential valuation growth of 24% [11][10]. Core Insights - The company is recognized as a global leader in diversified chip design, ranking among the top ten integrated circuit design firms in the NOR Flash, SLC NAND Flash, niche DRAM, and MCU sectors based on 2024 sales [10][24]. - The demand for AI toys, humanoid robots, and other edge devices is expected to surge in 2025, significantly boosting the need for the company's SPI NOR Flash products, which are essential for program storage and high-speed data reading [10][69]. - The company is strategically positioned to capture market share in the DRAM sector as original manufacturers exit, with a robust product lineup and strong partnerships with domestic DRAM wafer manufacturers [10][73]. - The automotive electronics sector is a key focus, with the company offering a full range of automotive-grade products and actively pursuing certifications to support advanced driving systems [10][65]. Financial Data and Profit Forecast - The company anticipates total revenue of 9,376 million yuan in 2025, reflecting a year-on-year growth rate of 27.5% [9]. - The projected net profit attributable to shareholders for 2025 is 1,526 million yuan, with a significant year-on-year growth of 38.4% [9]. - The gross margin is expected to stabilize around 38.3% in 2025, with a gradual increase to 40.3% by 2027 [12]. Market Position and Growth Drivers - The specialized storage market is entering an upward cycle, driven by improvements in supply-demand dynamics and the increasing demand for AI applications, with the market projected to grow at a CAGR of 7.1% from 2025 to 2029 [43][48]. - The company is leveraging its technological advancements in NOR Flash and SLC NAND to meet the growing requirements of AI and automotive applications, positioning itself for substantial growth in these sectors [10][50]. - The report highlights the company's competitive edge in the SPI NOR Flash market, emphasizing its ability to provide high-performance products tailored for various applications, including AI and automotive electronics [10][64].

Core Viewpoint - The company is seizing growth opportunities in downstream multi-field demand, with a significant quarter-on-quarter performance increase in Q2 2025 [1] Group 1: Financial Performance - In H1 2025, the company reported revenue of 4.15 billion yuan, a year-on-year increase of 15%, driven by consumer subsidy policies and advancements in artificial intelligence technology [1] - The net profit attributable to the parent company for H1 2025 was 575 million yuan, up 11.31% year-on-year, with a gross margin of 37.21% and a net margin of 14.16% [1] - In Q2 2025, revenue reached 2.24 billion yuan, representing a year-on-year increase of 13.09% and a quarter-on-quarter increase of 17.40% [1] Group 2: Product Line Performance - In H1 2025, revenue from storage chips grew approximately 9.2% year-on-year, with significant demand growth in the consumer sector for Flash products [2] - The company’s MCU products achieved nearly 20% year-on-year revenue growth, focusing on high-quality consumer and industrial markets [2] - Custom storage solutions for AI mobile phones, AI PCs, automobiles, and robotics are progressing well in client expansion [2] Group 3: Future Outlook - The company forecasts net profits attributable to the parent company of 1.605 billion yuan, 2.106 billion yuan, and 2.683 billion yuan for 2025, 2026, and 2027 respectively [2] - Based on comparable company valuations and the company's product layout advantages, a target price of 183.95 yuan per share is set, maintaining a "buy" rating [2]

Group 1 - The China Securities Regulatory Commission (CSRC) has requested Zhaoyi Innovation (603986.SH) to provide supplementary information regarding its overseas listing application, including potential prohibitive circumstances for the issuance [1] - Zhaoyi Innovation submitted its listing application to the Hong Kong Stock Exchange on June 19, 2025, with CICC and Huatai International as joint sponsors [1] - The CSRC has outlined specific areas for Zhaoyi Innovation to clarify, including the establishment and changes in shareholding of its predecessor, Zhaoyi Limited, and the operational compliance of its domestic subsidiaries [1] Group 2 - The company is a global leader in diversified chip design, offering a range of products including Flash, niche DRAM, MCU, analog chips, and sensor chips, along with corresponding algorithms and software solutions [2] - The company operates on a fabless business model, focusing on integrated circuit design and R&D to maintain technological leadership [2] - According to a report by Frost & Sullivan, the company is a market leader in multiple sectors and is the only integrated circuit design company globally ranked in the top ten for NOR Flash, SLC NAND Flash, niche DRAM, and MCU as of 2024 [2]

Group 1 - The China Securities Regulatory Commission (CSRC) has requested Zhaoyi Innovation to provide supplementary explanations regarding its overseas listing application, including potential prohibitive circumstances [1] - Zhaoyi Innovation submitted its listing application to the Hong Kong Stock Exchange on June 19, 2025, with CICC and Huatai International as joint sponsors [1] - The CSRC has outlined specific areas for Zhaoyi Innovation to clarify, including the establishment history and shareholder changes of its predecessor, Zhaoyi Limited, and the operational compliance of its business [1] Group 2 - The company is a global leader in diversified chip design, offering a wide range of products including Flash, niche DRAM, MCU, analog chips, and sensor chips, along with corresponding algorithms and software solutions [2] - The company operates on a fabless business model, focusing on integrated circuit design and R&D to maintain technological leadership [2] - According to a report by Frost & Sullivan, the company is a market leader in multiple sectors and is the only integrated circuit design company ranked in the global top ten for NOR Flash, SLC NAND Flash, niche DRAM, and MCU based on 2024 sales [2]

Group 1 - The China Securities Regulatory Commission (CSRC) has requested Zhaoyi Innovation to provide supplementary information regarding its overseas listing application, including legal opinions on various operational and compliance matters [1] - Zhaoyi Innovation submitted its listing application to the Hong Kong Stock Exchange on June 19, 2025, with CICC and Huatai International as joint sponsors [1] - The CSRC's inquiries include the establishment history of Zhaoyi Innovation's predecessor, Zhaoyi Limited, and the changes in its capital and shareholder structure since inception [1] Group 2 - The company is a global leader in diversified chip design, offering a wide range of products including Flash, niche DRAM, MCU, analog chips, and sensor chips, along with corresponding algorithms and software solutions [2] - The company operates under a fabless business model, focusing on integrated circuit design and R&D to maintain technological leadership [2] - According to a report by Frost & Sullivan, the company is a market leader in multiple sectors and is the only integrated circuit design company globally ranked in the top ten for NOR Flash, SLC NAND Flash, niche DRAM, and MCU as of 2024 [2]

Core Insights - The company is experiencing continuous operational improvement, driven by enhanced DRAM supply, leading to simultaneous growth in volume and price. In H1 2025, the company achieved revenue of 4.15 billion yuan, a year-on-year increase of 15.0%, and a net profit attributable to shareholders of 575 million yuan, up 11.31% year-on-year [1] Storage Segment - Revenue from the storage segment grew by 9.23% year-on-year, with significant growth in NOR Flash and niche DRAM products. In H1 2025, storage revenue reached 2.845 billion yuan, with a gross margin of 38.50%. The demand in the consumer sector increased notably due to government subsidies and seasonal factors [1][2] - The company launched a dual-voltage SPI NOR Flash product tailored for 1.2V SoC applications, enhancing its strategic positioning in embedded storage solutions for emerging fields such as IoT and AI [2] - The niche DRAM market is experiencing a supply-demand imbalance as major overseas manufacturers exit, resulting in increased volume and price for the company's niche DRAM products. The revenue contribution from DDR4 products is rising significantly [2] MCU Segment - The MCU business achieved revenue of 959 million yuan in H1 2025, reflecting a year-on-year growth of 19.11% with a gross margin of 37.31%. The consumer and industrial markets remain the largest revenue sources [3] - The company is expanding its product lineup, including the introduction of the GD32C231 series entry-level MCU, targeting applications in small appliances and automotive battery management systems [3] Sensor Segment - Sensor revenue remained relatively stable, reaching 193 million yuan in H1 2025, with a year-on-year increase of 0.53% and a gross margin of 38.98%. The company has launched a capacitive multi-touch control chip and has successfully passed E911 testing for its pressure sensors [4] Analog Segment - The analog chip revenue saw significant growth, exceeding a 4.5-fold increase year-on-year, aided by the acquisition of Suzhou Saichip. The integration of resources and technology is yielding positive results [4] Financial Projections - Revenue projections for 2025-2027 are 9.355 billion yuan, 11.518 billion yuan, and 13.526 billion yuan, representing year-on-year growth rates of 27.2%, 23.1%, and 17.4% respectively. Net profit projections are 1.455 billion yuan, 1.908 billion yuan, and 2.434 billion yuan, with corresponding growth rates of 31.9%, 31.2%, and 27.6% [5][6]

Investment Rating - The investment rating for the company is "Buy" with an expectation of over 15% increase relative to the CSI 300 index in the next six months [23]. Core Views - The company has shown steady revenue growth driven by both policy incentives and market demand, with a 15% year-on-year increase in revenue for the first half of 2025 [6][9]. - The supply situation for niche DRAM has improved, leading to simultaneous increases in volume and price, while the customized storage market is expanding successfully [9][10]. - The company is actively investing in R&D, with a 7.7% increase in R&D expenditure in the first half of 2025 [9]. Summary by Sections Financial Performance - In the first half of 2025, the company achieved revenue of 4.15 billion yuan, a year-on-year increase of 15.00%, and a net profit of 575 million yuan, up 11.31% year-on-year [6]. - The second quarter of 2025 saw a revenue of 2.24 billion yuan, a 13.09% year-on-year increase and a 17.40% quarter-on-quarter increase [6]. Market Demand - The demand for the company's products in storage and computing, mobile, automotive, and consumer sectors has seen rapid growth due to AI and consumer subsidy policies [9]. - The company's NOR Flash and niche DRAM products have experienced significant growth, with the latter benefiting from a supply-demand imbalance as major competitors exit the market [9]. Product Development - The company is expanding its customized storage business in AI mobile, AI PC, automotive, and robotics sectors, with successful client acquisition [10]. - The MCU products have also seen nearly 20% revenue growth, focusing on high-quality consumer and industrial markets [10]. Profitability Forecast - Revenue projections for 2025-2027 are 9.16 billion, 11.04 billion, and 13.19 billion yuan respectively, with corresponding net profits of 1.51 billion, 1.99 billion, and 2.46 billion yuan [10]. - The expected EPS for 2025-2027 is 2.27, 3.00, and 3.70 yuan, with PE ratios of 69.50, 52.57, and 42.60 respectively [10].

Group 1 - The core viewpoint is that the company, as a leading player in the domestic design sector, has significant long-term growth potential and a favorable competitive landscape, particularly benefiting from the trend of AI edge computing [1] - The company's target market for niche storage and MCU core products is expected to exceed $50 billion by 2029, with projected global market shares for NoR Flash, niche DRAM, SLC NAND, and MCU in 2024 being 18.5%, 1.7%, 2.2%, and 1.2% respectively, indicating ample growth space [1] - The competitive landscape is expected to be dominated by South Asia, Winbond, and domestic leading enterprises, with South Asia and Winbond's niche storage manufacturers experiencing continuous losses and historically low gross margins in Q1 2025, while international giants are gradually exiting the niche DRAM market, suggesting a sustained price increase trend until the end of the year [1] Group 2 - The 3D WoW solution demonstrates customization and high-performance advantages in edge AI, with ASIC chips being recognized for their high bandwidth and low latency, leading to a trend of self-developed ASICs for AI inference [2] - Memory bandwidth is identified as a bottleneck in edge AI systems, and the company's customized storage is making progress in various fields such as AI smartphones, AI PCs, automotive, and robotics, which is expected to become a significant contributor to the company's DRAM business line [2] - Revenue forecasts for the company are projected to be approximately 9.13 billion, 11.11 billion, and 13.53 billion yuan for 2025 to 2027, with net profits expected to be around 1.67 billion, 2.02 billion, and 2.62 billion yuan respectively, highlighting the company's leading position in the customized storage sector [2]