Incident: The company issued an announcement. On January 26, 2022, Cintou Wei, an important shareholding company of the company, and the Hefei High-tech Industrial Development Zone Management Committee signed the “Investment Cooperation Agreement for the Core Investment Microfilter Chip R&D and Production Headquarters Project”. The agreement stipulated that the project would invest a total investment of 5.5 billion yuan and be implemented in two phases. Silicon Investment Micro will use the mature technology and industrialization resources of relevant holding subsidiaries to build the R&D, design and production of filter chips and modules. The expansion of RF front-end production capacity has taken an important step.
The scarce capabilities of high-end SAW technology products are expected to achieve market breakthroughs. In the 5G era, the value of RF front-ends has increased, and products are moving towards modularization. Under the wave of localization, domestic RF manufacturers have developed rapidly. Among them, localization of filters is lagging behind. Judging from technological trends, SAW will still be an important part of the filter market. High-performance filters such as TC-SAW are the future trend, and WLP technology is the key to breakthroughs in the development of domestic manufacturers. Through the acquisition of NSD by Silicon Investment Micro, the company entered the RF front-end field. NSD products cover WLP SAW filters and CSP SAW filters. It is currently the only manufacturer with WLP technology and the ability to stably supply WLP filters other than the five major RF international giants. It has been steadily supplying wafer-level packaged SAW filters used in RF front-end modules to well-known customers for many years.
Plans to expand production are progressing steadily, and we look forward to unlocking incremental performance. Based on NSD's existing technology and production capacity, the company is steadily promoting domestic production capacity and R&D investment. According to investor research information disclosed by the company, Core Investment and China's factory have now formed a core R&D, sales, and factory team. The plan is to expand the factory team to 500 people in the future. The plan will mainly target terminal or module customers. With the release of production capacity and customer verification, it is expected to gradually contribute to incremental performance.
Investment advice: We expect the company's net profit for 2021-23 to be 236, 265, and 286 million yuan respectively, EPS to be 0.16, 0.18 and 0.19 yuan, and PE to be 43, 38, and 35x. We are optimistic about the scarcity of the company's filter business and maintain the company's “buy” rating.
Risk warning: car sales fell short of expectations, and the progress of mass production of filters fell short of expectations.