Incidents:
The company released its “2022 Annual Report” after the market closed on April 19, 2023.
Comment:
Firmware business and cloud service business are driven by two wheels. Revenue achieved steady growth. In 2022, the company achieved revenue of 282 million yuan, an increase of 19.20% over the previous year. Among them, the core firmware business of cloud computing equipment achieved revenue of 151 million yuan, an increase of 12.83% over the previous year, and the cloud service business achieved revenue of 121 million yuan, an increase of 21.85% over the previous year. The company achieved net profit of 51.005 million yuan, an increase of 21.01% over the previous year; net profit after deducting the return of the mother was 2,9012 million yuan, a year-on-year decrease of 88.65%.
The domestic innovation market has broad prospects with strong support from relevant policies, but market competition is fierce due to the large number of domestic chip platforms. In order to further seize the development opportunities of the Xinchuang industry and enhance the competitive advantage of the company's products, the company continues to increase investment in R&D and increase its market share.
Baiao BYOCore 2.0 was fully implemented, suitable for distribution and creation of a secure closed loop. In order to better support domestic computer product upgrades and service the Xinchuang industry, the company independently developed a complete firmware framework platform that can use a code framework and tool chain to support all mainstream international and domestic Xinchuang CPUs, as well as downstream complete machine products. The name of this cross-architecture, cross-hardware platform kernel product is BYOCore 2.0. In 2022, Baiao BYOCore 2.0 was fully implemented, and BIOS products equipped with 2.0 were fully implemented by domestic chip manufacturers such as Haiguang, Kunpeng, Zhaoxin, Feiteng, and Longxin, as well as related reference codes and complete products from international manufacturers such as Intel and AMD. Most products have already been mass-produced and marketed. In response to changes and new demand in the Xinchuang and commercial markets, BYOCore 2.0 continues to expand new features: adding support for RISC-V, and has cooperated with several leading international and domestic manufacturers to carry out adaptation work and develop standards; it includes a collection of BYOsafe security functions, integrating key security requirements such as national secret algorithms, national secret signatures, and national secret trust chain reconstruction, opening up the chip upward and linking domestic operating systems such as Tongxin and Kirin to complete a closed loop of security.
The cloud computing and firmware market is developing rapidly, and the company's business is expected to continue to benefit. According to data from the “White Paper on Cloud Computing (2022)” published by the China Academy of Information and Communications Technology, China's public cloud LaaS, PaaS, and SaaS markets reached 161,470 billion yuan, 19.60 billion yuan, and 37.040 billion yuan respectively, with an overall growth rate of 70.85%. According to IDC data, global server shipments exceeded 15.16 million units in 2022, an increase of 12% over the previous year, with an output value of 121.58 billion US dollars. According to the “2022 China Server Market Tracking Report” published by IDC, the size of the Chinese server market in 2022 was $27.34 billion. Global PC shipments fell 16.5% to 292 million units in 2022. According to Canalys, shipments to the Chinese PC market fell 15% to 48.5 million units in 2022. As the global economy continues to recover, China's cloud computing market is developing rapidly and policies are encouraging, the company's cloud service business and cloud computing equipment core firmware business are expected to continue to grow.
Profit forecasting and investment advice
The company is a leading BIOS and BMC firmware developer in China and is expected to benefit from the development of the Xinchuang industry. The company's revenue for 2023-2025 is estimated to be 396, 542, and 719 million yuan, net profit of the parent is 0.78, 111, and 156 million yuan, EPS is 0.89, 1.28, and 1.79 yuan/share, and the corresponding PE is 96.25, 67.09, and 47.94 times. Maintain a “buy” rating considering the company's future growth.
Risk warning
Business model risks for core firmware of cloud computing devices; risk of accounts receivable recovery; risk that Intel's authorized cooperation cannot be renewed; risk of increased market competition.