New Generation: Memory supply is secure, gross profit margin target maintained at 43% to 47%

New Generation (7750), a major controller manufacturer, held a press conference on the afternoon of the 13th. The price of the key raw material memory has skyrocketed this year, but New Generation has obtained key raw materials through three arrows. The relevant memory inventory is conservatively expected to be OK by the middle of next year. The demand for new generation related orders remains strong. Even if there is currently no price adjustment plan, but with the optimization of the product mix, the gross profit margin is expected to remain within the company's target range of 43% to 47%. With the opening of the new factory in Malaysia, the utilization rate will increase significantly after the second quarter of next year.

New Generation Chief Financial Officer Lin Dongxu pointed out that New Generation's revenue in the second quarter of this year was 8.2 billion yuan and 7.8 billion yuan in the third quarter. In the past, the third quarter was a relatively off-season, but this year's third quarter is almost the same as the second quarter. He believes that seasonal changes next year will be minimal. At present, overseas markets do not account for a large proportion of revenue, but they grow by 35% every year. They have made great breakthroughs in the Indian market recently. The new factory in Malaysia is expected to be completed in the first quarter of next year to meet market demand in India and ASEAN countries. In addition to Taiwan and Suzhou, Xindai has established a third supply chain base, and Malaysia has tariff advantages when shipping to India.

Lin Dongxu mentioned that the second factory in Suzhou, China, the new factory in Malaysia and the new office in India have been completed one after another. Among them, the second factory in Suzhou has twice the production capacity of the first factory. The production capacity of the controller will be 2.5 times after the first quarter of next year. The utilization rate will be greatly improved after the second quarter of next year. At present, relevant orders are still very strong, but Lin Dongxu emphasized that the market still depends on the supply situation. The shipment of the new generation will not be delayed until the middle or second half of next year. This is a competitive advantage. He mentioned that memory has increased tenfold this year, but the gross profit margin of the new generation has been maintained, which means product optimization and cost reduction control are good.

Huang Fanzhi, the new director, also mentioned that China’s market share last year was about 23%, and 150,000 sets of controllers were sold. This year, 220,000 sets were sold, which translates to a market share of at least 25%. She hopes to see the prefix 3 next year. She also revealed that this year’s robotic arms are expected to sell 2,500 units in 2026, doubling the more than 1,000 units last year. The goal is to continue doubling growth in 2027.

Xindai controls the gross profit margin at 45% plus or minus two percentage points, that is, between 43 and 47%, which is a range that Xindai considers to be stable. It was as high as 48% in the first quarter of this year, and then fell to 44 to 45% in the second and third quarters. The recent slowdown in memory prices, coupled with the optimization of the product mix, the new generation of gross profit margin can be maintained steadily within the target range.

Xindai also revealed that despite the rising memory prices, there are still sufficient stocks. There are three main strategies, including adjusting the spot stock, which can be used until the middle of next year, signing long-term contracts with original manufacturers, and also purchasing from Chinese memory manufacturers. The most critical memory material source will be safe by the end of next year.