Incident: The company released its 2022 annual report and its report for the first quarter of 2023. In 2022, the company achieved revenue of 525 million yuan, YOY +28.83%; net profit returned to the mother of 77 million yuan, YOY +9.55%; after deducting non-net profit of 0.09 million yuan, YOY -79.43%. 2023Q1 achieved revenue of 136 million yuan, YOY +173.26%; net profit of the mother was -27 million yuan, YOY -8837.89%; after deducting non-net profit - 37 million yuan, YOY -132.09%.
Product structures have been continuously adjusted, and revenue from automotive electronic chips and chip customization services has increased dramatically. Revenue increased sharply in 2022 and 2023Q1, mainly due to the significant increase in the company's automotive electronics chip business and chip customization service revenue. In 2022, the company shipped more than 4 million automotive electronic chips, and the shipment volume increased more than tenfold over the previous year.
2022/2023Q1 automotive electronics and industrial control revenue was 189/031 million yuan, YOY +127.51%/+229.19%; 2022/2023Q1 edge computing and network communication revenue was 1.21/075 billion yuan, YOY +71.41%/+3499.35%.
Higher wafer costs are compounded by high R&D investment, and company profits are under pressure. Gross profit margin in 2022 is 42.02%, YOY-10.93pcts. 2023Q1 gross profit margin 23.15%, YOY-22.31pcts.
The decline in gross margin was mainly due to tight wafer manufacturing, and the unit cost of wafers rose sharply year over year.
In the second half of 2022 and 2023Q1, the company's major wafer manufacturing suppliers raised wafer manufacturing prices, and the gross margin of the chip mass production service business fell sharply to 16.52% in stages in 2022, YOY-49.07PCTS. In terms of period expenses, 2022 sales/management/finance ratio YOY-2.21/+5.78/-3.66 pcts. The increase in management expenses is mainly due to the expansion of the company's size and the increase in employee remuneration and brokerage expenses; the decrease in financial expenses is mainly due to a sharp increase in interest on deposits. In terms of profit, net profit to the mother in 2022 was YOY +9.55%, mainly due to a sharp increase in corporate financial management revenue and government subsidies; YOY -79.30% after deducting non-net profit in 2022 was mainly due to a sharp increase in R&D investment and a sharp rise in wafer manufacturing costs, which led to a decline in overall gross margin. The net profit of 2023Q1 returned to the mother YOY -8837.89%, mainly due to the increase in R&D expenses, the increase in product costs and the decline in non-operating income (year-on-year decrease of 5.9549 million yuan, YOY -95.72%).
Firmly promote customized chip services, and drive growth through intensive R&D. The company has greatly increased the number of R&D personnel and continued to increase R&D investment. In 2022/2023Q1, the company's R&D expenses were 152/52 million yuan, and YOY +70.11%/+136.02%, respectively. 1) A number of R & D developments have progressed smoothly, with remarkable results. In 2022, the company successfully developed a series of high-end body/gateway control chips CCFC2010BC/CCFC201BC/CCFC2012BC, which can replace foreign products, covering new energy vehicles and traditional passenger vehicles; in November 2022, the company completed the development of the automotive domain controller chip CCFC2016BC. 2) Various automotive electronic chips under development are expected to contribute to increased performance soon, including: the next-generation high-performance new energy battery management control chip CCFC3008PT is expected to be designed and put into mass production in the first quarter of 2023; the next-generation automotive electronic powertrain and new energy battery management (BMS) control chip CCFC2007/PT chips have begun environmental tests by leading domestic automotive power battery manufacturers and is expected to be mass-produced and loaded in 2023; the first vehicle regulation MCU chip based on the RISC-V command architecture The CCFC3010PT is expected to be put into production in the fourth quarter of 2023; the automotive electronic security chip CCM3320S is undergoing customer verification. It mainly targets leading international manufacturers such as NXP and Infineon related products; the airbag ignition driver chip CCL1600B chip and the NFC RF transceiver chip for automotive PEPS (keyless entry) applications are expected to be put into production in the first quarter of 2023; mass production of the first-generation improved Raid chip is expected to be completed in mid-April 2023. 3) Empower high-end chips to catch up with international mainstream. The company is designing/developing CCFC3007PT, a high-end powertrain control chip product for the NXP (NXP) MPC5777, and the CCFC3007PT and CCFC3009PT chip series for power, chassis, and body domain control. The CCD5001 chip, a noise-canceling SoC chip for new energy vehicles being developed, is designed using 12nm advanced process technology to both improve chip performance and power consumption and break the monopoly situation of foreign companies. At the same time, the second-generation higher performance Raid control chip CCRD4516 developed by the company based on its own high-performance RISC-V CPU is expected to achieve the performance of the international mainstream Raid chip LSI9560 in the future.
Actively strengthen the construction of fund-raising projects and the development of automotive electronic chips. In 2023, the company will continue to actively strengthen the construction of fund-raising projects such as cloud-based information security chip design and industrialization projects, SoC chip design platform design and industrialization projects based on C*Core CPU cores, and CPU core design projects based on the RISC-V architecture, and will invest all of the funds raised in the field of scientific and technological innovation. It is expected that all three projects will reach their intended use in October 2023. Furthermore, the company will step up efforts to develop the company's automotive electronic chip products to form a series of control chips for body control, engine control, domain control and new energy battery management to meet the needs of the automotive industry for electrification, connectivity and intelligence.
The repurchase of shares shows confidence in development. On January 10, 2023, the company announced that it intends to repurchase the company's common stock shares through centralized bidding for future employee stock ownership plans or equity incentives. The amount of shares to be repurchased is 100-200 million yuan, and the proposed repurchase price will not exceed 73.97 yuan/share. On March 6, 2023, the company repurchased 215,700 shares of the company through the Shanghai Stock Exchange for the first time, accounting for 0.08987% of the total share capital. The repurchase transaction price was 55.00-57.06 yuan/share, with a payment amount of 11.98893 million yuan. As of March 31, 2023, the company had repurchased a total of 522,500 shares, accounting for 0.22% of the total share capital. The repurchase transaction price was 55.00-66.86 yuan/share, and the total payment amount was 319994 million yuan.
Profit forecast: The company is expected to achieve revenue of 1,230/2,089/3009 billion yuan in 2023-2025; Guimu's net profit is 2.54/452/671 million yuan. Maintain a “Recommended” rating.
Risk warning:
(1) Downstream demand fell short of expectations; (2) Industry competition intensified; (3) New product expansion fell short of expectations.