Qinchuan Machine Tool Mid-Year; Resilience, Growth.

Founded in 2015, Feixiang Technology is a unicorn enterprise in the domestic RF front-end chip industry, integrating R&D, design, and sales. In October 2022, it filed for IPO on the STAR Market. After a long period of suspended financial report updates, the Shanghai Stock Exchange recently published Feixiang Technology's response to the second round of inquiries, disclosing the financial report for 2023 and the performance range for the first half of 2024. We observe that Feixiang Technology has achieved a 15-fold increase in revenue over five years, with a year-on-year growth rate of 107% in the first half of 2024, turning losses into profits. The main product of Feixiang Technology is the RF power amplifier (PA), and the industry leader, Weijie Chuangxin, has just released its mid-year report for 2024. Comparing the public data of the two companies, Feixiang Technology's revenue and profit for the first half of 2024 have both surpassed Weijie Chuangxin, becoming the number one in the domestic RF PA segment.

According to the updated data from Feixiang Technology, the company achieved operating revenues of 116 million yuan, 365 million yuan, 916 million yuan, 1.022 billion yuan, 1.717 billion yuan, and 1.131 billion yuan from 2019 to the first half of 2024, respectively. The compound annual growth rate for the five years from 2019 to 2023 was 96.19%, with a year-on-year increase of 68.08% in 2023 and a remarkable 107.25% in the first half of 2024, indicating a rare continuous high-speed growth.

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Feixiang Technology still reported losses during the reporting period from 2021 to 2023, with a significant loss of 360 million yuan in 2022, which was significantly reduced to 193 million yuan in 2023, better than the forecasted loss of 230 million yuan provided in response to the first round of inquiries. This also indicates that Feixiang Technology has begun to turn around its operational trend. According to the latest data, Feixiang Technology's revenue for the first half of 2024 reached 1.13 billion yuan, a year-on-year increase of 107.25%, with a net profit ranging from 13.28 million yuan to 18.28 million yuan, indicating a significant improvement in operations and a shift from loss to profit. In comparison, Weijie Chuangxin achieved a revenue of 1.07 billion yuan in the first half of 2024, a year-on-year increase of 20.28%, with a profit of 11.27 million yuan. Feixiang Technology's forecasted profit range is higher than Weijie Chuangxin's net profit, suggesting that Feixiang Technology has surpassed Weijie Chuangxin in the first half of 2024.

The significant improvement in Feixiang Technology's performance began in the third quarter of 2023, achieving quarterly profitability in the fourth quarter of 2023, and the forecast for the first half of 2024 continues to be profitable. Feixiang Technology stated that it seized the favorable timing of the launch of new 5G and ubiquitous connectivity products, the end of inventory reduction by terminal customers, and the improvement of consumer expectations. By improving product structure and significantly increasing the gross margin, which was raised to 18%-20% in the first half of 2024, the company successfully achieved a substantial increase in both revenue and profit. Feixiang Technology is optimistic that, based on the profitability in the first half of 2024, it will be able to achieve profitability for the entire year. According to the quarterly performance of Feixiang Technology during the reporting period, the second half of the year is generally better than the first half, making the forecast for full-year profitability in 2024 reasonable.

The RF front-end chip track is a typical "hard technology" industry and is one of the 35 critical technologies identified by the Science and Technology Daily in 2018. The existing listed companies in the domestic RF chip industry include ZSW (300782), Weijie Chuangxin (688153), and Huizhi Micro (688512). Among them, ZSW's main product is the RF receiver chip, while Weijie Chuangxin and Huizhi Micro focus on the RF transmission chip, which has a larger market scale, higher technical difficulty, and is still dominated by foreign manufacturers in terms of technology and market, with PA (power amplifier) as the main product. Feixiang Technology's business scope is the same as Weijie Chuangxin and Huizhi Micro, focusing on RF front-end chips with PA as the main product. According to the published mid-year revenue for 2024, both Feixiang Technology and Weijie Chuangxin have exceeded 1 billion yuan, while Huizhi Micro only has 253 million yuan, falling far behind.

Feixiang Technology's RF products include 5G, 4G, 3G, 2G, WiFi, and satellite communication, etc. In 2023, the company's top two businesses, 4G and 5G modules, achieved revenues of 938 million yuan and 481 million yuan, respectively, with corresponding growth rates of 63.22% and 59.34%, both showing high-speed growth. At the same time, Feixiang Technology vigorously developed its WiFi RF chip business, with revenues of about 247 million yuan in the first half of 2024, surpassing the comparable company Kangxi Communication (688653), which was listed in 2023, with a half-year revenue of 225 million yuan. Feixiang Technology expects this new business to maintain a high-speed growth trend in the future, bringing new opportunities for the company.

In 2023, Feixiang Technology's R&D expenditure was 198 million yuan, a year-on-year increase of 15.87%, with a compound growth rate of R&D expenditure of 27.22% from 2021 to 2023. The continuous growth in R&D has provided excellent product competitiveness for the revenue and profit growth of Feixiang Technology, and it is expected that the company will further increase R&D investment to continue creating performance growth.

The integrated circuit industry, as the foundation and core industry of the modern information industry, has seen an increasing demand for high-end chips with the rapid expansion of China's electronic information industry. Coupled with policy support, market substitution, and capital promotion, the prospects for the RF chip industry continue to be positive. The China Securities Regulatory Commission has issued eight measures for the STAR Market to support outstanding "hard technology" companies that have not yet made a profit to go public. Feixiang Technology has maintained a compound high-speed growth of over 30% for many years, and its half-year performance has surpassed Weijie Chuangxin to become the industry leader, achieving profitability in the first half of 2024, demonstrating a very prominent growth potential. It is expected that Feixiang Technology will continue to strive for the IPO path on the STAR Market.