Based on the precision manufacturing industry, focus on MEMS fine microelectronic components and semiconductor chip test probe field. The company actively develops overseas business, and its customers are mainly leading companies in the field of consumer electronics and semiconductor testing, and overseas revenue is expected to account for more than 60% this year. Thanks to the demand for MEMS components driven by the continuous expansion of products such as TWS headphones, smart speakers and wearable devices, the domestic replacement process of semiconductor chip test probes is accelerated, and the company's performance is expected to maintain a high growth trend in the future. At the same time, the company is determined to increase the investment in MEMS wafer-level and substrate-level test probes, which is expected to break the foreign monopoly. In view of the company's industry status and subsequent growth potential, the company is given a target share price of RMB148, corresponding to about 60 times PE in 2022, with a "buy" rating for the first time.
Downstream consumer electronic products continue to be popular, and MEMS precision and micro electronic components are growing steadily. The company's MEMS precision electronic components products are mainly micro shields, bound to Goyle shares, and downstream applications are consumer electronics products such as TWS headphones, smart speakers, smartwatches / watches and AR/VR headsets. TWS headphones have become a popular style in recent years, with shipments growing at a compound rate of 88% from 2017 to 2020, and is expected to grow at a compound rate of 25% in the next three years. As the meta-universe concept continues to popularize, AR/VR headsets are expected to open up a new space for growth. Sales of AR/VR headsets are expected to grow from 7.06 million in 2020 to 76.7 million in 2024, with a compound annual growth rate of 81.5 per cent. The boom in downstream consumer electronics has led to steady growth in the company's MEMS business, which is expected to grow at a compound rate of 30 per cent over the next three years.
Leading in the technology industry, the semiconductor chip test probe has exploded. Semiconductor test probe is a new product that the company began to develop in 2015, during which the technology has been continuously improved, and various performance indicators have reached the leading level in China. From 2019 to now, the income has shown explosive growth. The company's test probe is mainly used in testing machines and probe tables for well-known semiconductor companies such as NVIDIA Corp, Aidawan and Terida. At present, the market share of the test probe is about 3%. Thanks to domestic substitution in all links of the semiconductor industry chain, the company's market share is expected to continue to increase, and it is expected that the annual compound growth rate of this business income will exceed 50% in the next three years.
We will definitely increase the investment in MEMS wafer-level probe and substrate-level probe projects to break the foreign monopoly. The company recently decided to raise no more than 700 million yuan for MEMS wafer-level probe and substrate-level probe projects to fill the domestic gap. According to VLSI data, the global probe card market in 2020 was US $2.206 billion, an increase of 19.94% over the same period last year. The global MEMS probe card market accounted for US $1.451 billion, accounting for 65.80% of the probe card market. The domestic probe card consumer market accounted for 12.5% of the global market share, but the global market share of domestic suppliers was only 1.1%.
Risk factors: the risk of high customer concentration; the risk of trade disputes; the construction progress of fixed increase and fund-raising projects is not as expected.
Investment suggestion: the company has been based on the precision manufacturing industry for more than 10 years, and the quality rate, manufacturing accuracy and capacity scale are in the forefront of the country. The company's customers are mainly international leading companies in consumer electronics and semiconductors, which are widely recognized in the market. If the company has new products, it can quickly adapt to downstream customers, which is conducive to the cultivation of new business growth points. Benefiting from the continuous growth of demand for downstream consumer electronic products, the process of domestic replacement of semiconductor chip test probes has been accelerated, and the company's performance is expected to maintain a high growth trend in the future. From 2021 to 2023, the EPS of the forecast company is 1.62 RMB, 2.46 and 3.64 yuan, respectively, and the corresponding valuations are 67.8x, 44.7x and 30.2x, respectively. In view of the comparable company valuation, the company's industry status and subsequent higher growth potential, the year-end valuation switch, giving the company a target share price of RMB148, corresponding to about 60 times PE in 2022, giving a "buy" rating for the first time.