Key takeaway

The company released its interim report for 2026. Revenue: The company generated revenue of RMB3.111bn in 2Q26, up 75.83% YoY. Gross margin: The company recorded a gross margin of 56.10% in 2Q26, up 0.22 pct YoY and nearly 2 pcts QoQ from 1Q26. Driven by a higher gross margin and economies of scale on the expense side, the company recorded net profit of RMB1.298bn in 2Q26, up 90.11% YoY, with its net margin rising 3.14 pcts YoY to 41.71%. In addition to its regular operating performance, the company's prepayments and inventories at the end of 2Q26 both increased significantly QoQ from 1Q26, reflecting its continued proactive preparations on the supply side; we expect its delivery capacity to improve to some extent in 3Q26.

Event

The company released its interim report for 2026. On a standalone quarterly basis, the company generated operating revenue of RMB3.111bn in 2Q26, up 75.83% YoY; net profit attributable to shareholders of the parent company was RMB1.298bn, up 90.11% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB1.231bn, up 93.41% YoY.

Quick Take

I. Revenue: Rapid growth, but supply chain constraints weighed on the delivery schedule.

Risks:

1) Supply chain stability risk: The company operates under a fabless model, and its suppliers include IP licensors, wafer foundries, and packaging and testing providers. The integrated circuit industry chain features specialized divisions of labor and high technical barriers. In addition, the company and some of its subsidiaries have been added to the Entity List, posing certain risks to the stability of the company's supply chain. Switching to new suppliers will incur certain costs and may adversely affect the company's operating performance. Given the delivery risks in the supply chain, we conducted an appropriate quantitative risk analysis:

2) Core competitiveness risk : The company operates in a technology-intensive industry. The company’s core technologies and R&D capabilities directly affect its core competitiveness. The company is one of the few enterprises in the industry that have comprehensively and systematically mastered the core technologies required to develop and commercialize intelligent chips and their underlying system software. Its core technologies present certain technical barriers, and its core technologies are industry-leading. However, as artificial intelligence applications and algorithms become increasingly widespread, many leading integrated circuit companies have turned their attention to artificial intelligence chips. This field has also become a key focus for many integrated circuit design startups. In addition, R&D projects involve significant uncertainty in terms of their progress and outcomes. The company faces the risk that its upfront R&D investment may not be recovered and the expected benefits may not be achieved. Going forward, the company will continue to align closely with market demand and improve the efficiency of its R&D investment, thereby strengthening its core competitiveness.

3) Risk of cost fluctuations: In recent years, demand for raw materials in China’s semiconductor industry has continued to grow, while purchase prices have generally trended upward. If upstream raw material prices continue to rise, the company’s operating results may be adversely affected.