Recent Event: The company released its 2025 interim report. In the first half of 2025, the company achieved revenue of RMB 5.464 billion, up 45.21% year-over-year; net profit attributable to shareholders of RMB 1.201 billion, up 40.78% year-over-year; adjusted net profit attributable to shareholders of RMB 1.090 billion, up 33.31% year-over-year. In Q2 2025 alone, the company achieved revenue of RMB 3.064 billion, up 41.15% year-over-year and 27.66% quarter-over-quarter; net profit attributable to shareholders of RMB 696 million, up 23.14% year-over-year and 37.49% quarter-over-quarter; adjusted net profit attributable to shareholders of RMB 648 million, up 18.71% year-over-year and 46.52% quarter-over-quarter.
Investment Highlights:
Revenue maintains high-speed growth with inventory and contract liabilities remaining at high levels. In the first half of 2025, demand for domestic high-end chips continued to surge. The company deepened cooperation with OEMs and ecosystem partners in key industries and areas, accelerated customer adoption, and expanded the market presence of high-end processor products, driving sustained high-speed revenue growth. The company's Q2 2025 gross margin was 59.33%, down 4.50% year-over-year and 1.86% quarter-over-quarter; Q2 2025 net margin was 30.29%, down 8.01% year-over-year but up 0.55% quarter-over-quarter. At the end of Q2 2025, inventory was RMB 6.013 billion, an increase of RMB 219 million from the end of Q1 2025; contract liabilities were RMB 3.091 billion at the end of Q2 2025, a decrease of RMB 146 million from the end of Q1 2025. Both inventory and contract liabilities remained at high levels, providing assurance for continued high-speed performance growth. The company continues to increase R&D investment, continuously enhancing product competitiveness, with total R&D investment of RMB 1.711 billion in H1 2025, up 24.68% year-over-year.
Hygon DCU products demonstrate outstanding performance advantages and have built a comprehensive software ecosystem. Hygon DCU is based on general-purpose graphics processor design concepts, featuring full-precision support capabilities including double precision, single precision, half precision, and integer formats. It can fully exploit application parallelism, leverage large-scale parallel computing capabilities, rapidly develop high-efficiency applications, and provide computing power for scientific computing and artificial intelligence computing. It comprehensively supports deep learning training, inference scenarios, and large model scenarios. Hygon's self-developed DTK software stack supports proprietary operators and third-party components, building a unified underlying hardware driver platform with a complete hierarchical software stack, achieving "training and inference integration" for full AI scenario coverage. This represents one of the most complete ecosystems domestically, significantly reducing application migration difficulty. With excellent computing capabilities, efficient parallel processing performance, and a comprehensive software ecosystem, Hygon DCU has achieved large-scale applications in intelligent computing centers, artificial intelligence, and other fields, with continuous rapid iteration and upgrades, positioning it to benefit from the explosive demand for domestic computing power infrastructure.
Planning absorption and merger with Dawning Information to build complete domestic computing power industry ecosystem. On June 9, 2025, Hygon Information Technology released an announcement regarding the "Share Exchange Absorption and Merger with Dawning Information Industry Co., Ltd. and Fundraising for Supporting Funds and Related Party Transaction Pre-plan." The company is planning to absorb and merge Dawning Information through issuing A-shares to all A-share shareholders of Dawning Information via share exchange. Upon completion of this share exchange absorption and merger, Dawning Information as the absorbed party will terminate its listing, while Hygon Information Technology will be the surviving company. Dawning Information is a leading enterprise in China's high-end computer field, primarily engaged in R&D and manufacturing of high-end computers, storage, security, and data center products, while vigorously developing digital infrastructure construction and intelligent computing businesses. After the merger completion, Hygon will establish a complete domestic computing power industry ecosystem layout from high-end chip design to high-end computer systems and complete machines, demonstrating strong synergistic effects.
Profit forecast and investment recommendation. The company's CPU and DCU products maintain leading performance and ecosystem positions domestically. CPU products continue expanding market application areas and market share, while DCU products maintain rapid iteration and upgrades, positioning to benefit from the explosive demand for domestic computing power infrastructure. The company's planned absorption and merger with Dawning Information will create a complete domestic computing power industry ecosystem. We forecast the company's revenue for 2025-2027 at RMB 14.158/18.716/24.220 billion, with net profit attributable to shareholders for 2025-2027 at RMB 3.332/4.468/5.895 billion, corresponding to EPS of RMB 1.43/1.92/2.54, and corresponding P/E ratios of 103.74/77.37/58.64 times. We maintain a "Buy" rating.
Risk warnings: Risks of intensifying international geopolitical conflicts; risks of intensifying industry competition; downstream demand falling short of expectations; new product R&D progress falling short of expectations.
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