Leading domestic firmware, maintaining a “buy” rating
The company released its 2022 annual report, and the company's performance grew steadily. The company's competitive advantage is remarkable. Driven by Xinchuang and AI, future growth is outstanding. We raised our earnings forecast for 2023-2024 and added 2025. The estimated net profit for 2023-2025 is 1.02, 1.51, 2.21 (originally 1.01, 141) yuan, EPS is 1.18, 1.74, 2.54 (originally 1.16, 1.62) yuan, and the current stock price corresponds to PE 73.0, 49.4, 33.9 times, maintaining the “buy” rating.
Event: Company Releases 2022 Annual Report
(1) In 2022, the company achieved revenue of 282 million yuan, an increase of 19.20% over the previous year. Firmware and cloud service revenue were 15.1 million and 121 million yuan respectively, +12.83% and +21.85%, respectively. The company maintained steady growth; Guimu's net profit was 51 million yuan, an increase of 21.01% over the previous year; after deducting non-profit of 2.9 million yuan, a year-on-year decline of 88.65%, mainly due to subsidiary Zhuoyi Culture's loss of 23.53 million yuan, share payments of 8.73 million yuan, and increased R&D expenses.
(2) The sales, management, and R&D expenses rates were 3.53%, 13.84%, and 32.37%, respectively, and +1.31, +1.31, and +9.84 percentage points respectively over the previous year. The increase in sales expenses is mainly due to the company's expansion of sales channels and the increase in publicity expenses and sales staff remuneration; the increase in management expenses is mainly due to equity incentives to generate share payments; the increase in R&D expenses is mainly due to the company's increased investment in R&D to enhance competitiveness and meet future business needs.
The company's competitive advantage is remarkable. Xinchuang and AI drive growth together (1) BIOS and BMC firmware are a bridge connecting hardware and operating systems such as CPUs and GPUs. The entry threshold for the industry is high, and the competitive pattern is excellent. The company is one of the four mainstream X86 firmware suppliers in the world. In the context of Xinchuang, it has significant advantages over overseas manufacturers. Compared with other domestic manufacturers, the company already has the ability to develop mainstream domestic chips, and at the same time has an advantage in x86 firmware, and its market share is expected to continue to expand. (2) With the popularity of AIGC, major domestic and foreign manufacturers have begun an AI arms race, AI computing power is expected to maintain its high boom, and AI server predictions will usher in a new round of procurement demand. AI servers also require BIOS and BMC firmware, and the value is expected to increase. As a domestic leader, the company is expected to fully benefit. (3) The company independently developed the firmware framework platform BYOCore 2.0, which already supports mainstream international and domestic Xinchuang CPUs. BIOS products have been fully implemented by domestic chip manufacturers such as Haiguang, Kunpeng, Zhaoxin, Feiteng, and Longxin. Driven by Xinchuang, the company's long-term growth has been highlighted.
Risk warning: The localization process is lower than expected; prices are falling due to increased competition; labor costs are rising faster.