Investment Rating - The investment rating for the company is "Outperform the Market" [5][28][31] Core Views - The company is experiencing a short-term revenue decline due to storage price impacts, with a revenue of 1Q25 at 1.543 billion yuan, down 10.62% YoY and 7.58% QoQ. However, a gradual recovery in storage prices is expected in 2Q25, which may lead to performance improvement [1][20][28] - Embedded storage revenue for 2024 reached 4.241 billion yuan, a significant increase of 151.68% YoY, with products entering major client supply chains. AI-related products are also seeing rapid revenue growth, particularly in AI glasses, which are expected to grow over 500% YoY in 2025 [2][28] - The company is making steady progress in wafer-level advanced packaging, which is anticipated to drive long-term growth. The enterprise-level and automotive-grade storage segments are also expanding successfully [3][28] Summary by Sections Financial Performance - 1Q25 revenue was 1.543 billion yuan, with a net profit of -216 million yuan, reflecting a significant decline in profitability due to increased R&D expenses and inventory write-downs [1][28] - The company forecasts a gradual recovery in revenue, with expected net profits of 178 million yuan, 200 million yuan, and 382 million yuan for 2025, 2026, and 2027 respectively [28][29] Revenue Breakdown - Embedded storage is projected to generate revenues of 5.439 billion yuan, 6.459 billion yuan, and 7.363 billion yuan from 2025 to 2027 [28] - PC storage revenue is expected to be 2.206 billion yuan, 2.283 billion yuan, and 2.363 billion yuan for the same period [28] - Automotive-grade storage revenue is anticipated to grow to 155 million yuan, 294 million yuan, and 418 million yuan from 2025 to 2027 [28] Market Trends - The global storage market is experiencing a cyclical downturn, with NAND Flash prices expected to stabilize in 2Q25 after a decline in 1Q25. The company is well-positioned to benefit from this recovery [20][24] - The demand for AI-related storage products is increasing, particularly in the context of AI glasses and high-performance PC storage solutions [2][3][28]

Core Viewpoint - Baiwei Storage reported its largest quarterly loss since its IPO in Q1 2025, transitioning from profit in Q1 2024 to a net loss of 197 million yuan, primarily due to declining storage chip prices, increased inventory impairment, and high R&D expenses [1] Financial Performance - Baiwei Storage's Q1 2025 revenue was 1.543 billion yuan, a year-on-year decline of 10.62% [1] - The company experienced a net loss of 197 million yuan, marking its largest quarterly loss since going public [1] - Core business revenues, including embedded storage and PC storage, fell by 15%-18%, with gross margins dropping to a historical low of 1.99% [1] Market Trends - The global storage chip market continued its downward trend from Q3 2024, with DRAM contract prices down 18% year-on-year and NAND contract prices down 22% [2] - The decline in DRAM and NAND prices was attributed to excessive supply and weak demand [3] Competitive Landscape - Competitors like Zhaoyi Innovation and Jiangbolong faced challenges but managed to report growth in specific segments, with Zhaoyi Innovation achieving a revenue increase of 17.32% and a net profit growth of 125.82% [4] - SK Hynix reported an 86.5% year-on-year increase in DRAM revenue, driven by its HBM3E products in the AI server market [5] Strategic Initiatives - Baiwei Storage is focusing on high-value products, such as AI-related storage solutions, and has begun small-scale production of its self-developed UFS controller chip SP9300 [7][8] - The company plans to scale up production of SP9300 in Q2 2025, targeting an annual output of over 5 million units [8] R&D Investments - Baiwei Storage's R&D expenditure reached 123 million yuan in Q1 2025, a year-on-year increase of 25.82%, with a focus on advanced packaging technologies and integrated storage solutions [8] - The company is investing in a 3D stacking and silicon interposer project, expected to start production in the second half of 2025 [8] Customer Dependency - Baiwei Storage's top five customers account for 42% of its revenue, indicating a significant risk if major clients reduce orders [10]