Incidents:
Runxin Technology released its semi-annual report: In the first half of 2016, the company's revenue was 619 million yuan, an increase of 20.97% over the previous year, and net profit attributable to shareholders of listed companies was 23.29 million, an increase of 18.91% over the previous year.
Key points of investment:
China's leading technology distributor company is one of the leading IC distributors in China. The distribution industry has two forms of catalog distributors and technology distributors. The company is a technology-led sales distributor. The concentration of the IC design industry has continued to increase in recent years, while downstream demand is scattered.
With the rise of consumer electronics products such as smartphones, the speed of product iteration accelerated dramatically; after entering the IoT era, product diversity increased dramatically, all of which posed a challenge for brand manufacturers to launch high-quality products in a timely manner. Therefore, for chips, brand manufacturers not only need supply channels, but also the ability to design supporting chips. As a technology-based distributor, Runxin Technology has designed and arranged the highest-selling chips of famous IC chip manufacturers such as Qualcomm, Synopsys, NXP, Siqlo, AVX/Kyocera, and Pusit, which can effectively help downstream customers solve design problems.
Link core supplier and customer resources to share that upstream and downstream growth companies plan to privately issue no more than 13.5 million shares and raise no more than 817 million yuan for the new NXP product line project, Qualcomm Snapdragon processor IOT solution project, and Ruisheng Kaitai's integrated metal case product line project. The company has always had a good cooperative relationship with NXP. After the merger of NXP and Freescale, the product line was greatly expanded, and its market strength was greatly enhanced. The company seized this opportunity to quickly expand design solutions around several major product lines of new NXP smart card ICs and secure payment, automotive electronics, wireless connectivity and sensor systems, discrete and logic devices, and quickly occupied the market with core chip suppliers. At the same time, targeting the current largest market for mobile phones, the company cooperated with AAC to set up an integrated structural component product line for acoustic, radio frequency, and metal case, and quickly achieved batch sales of products using first-line customer resources that the company has accumulated over many years, including ZTE, LeTV, TCL, and Yulong Communications.
In the era of IoT, the company's wireless connectivity business space is vast, and the number of smart hardware in the IoT era will grow rapidly. It is estimated that by 2020, there will be more than 25 billion IoT access devices.
The company has always focused on IoT product line layout. In June, the company signed a contract with Qualcomm to become Qualcomm's value-added service provider for low-end Snapdragon processors and IoT application solutions.
Qualcomm has steadily ranked first in the smartphone chip market. After the CSR acquisition, Qualcomm's overall connectivity technologies, such as WiFi, BLE, and LTE, were at the leading level in the world. The demand for connectivity in the Internet of Things has increased dramatically. As a leading company in the chip industry, Qualcomm is expected to achieve rapid growth in chip sales in the IoT field. The company is devoting itself to deploying the Internet of Things around Qualcomm's product line. With the gradual increase in demand for IoT, the company's business will also experience accelerated growth.
Profit forecasting and investment ratings We believe that future smart devices will present a diversified trend, leading the entire industry chain to a specialized division of labor. Brand manufacturers will operate fewer and fewer factories themselves. At the same time, more and more hardware design companies rely more on reference designs. The company has always been committed to strengthening its design service capabilities around rapidly growing markets such as wireless connectivity and automotive electronics. Once the company's reference design is adopted, a relatively stable supply relationship will be formed. Therefore, we believe that the company's R&D investment in reference designs will form a solid moat. In the future, the company is expected to share the broad growth space in China's Internet of Things, automotive electronics and other fields. Regardless of the increase in issuance factors, the company's 2016-2018 EPS is expected to be 0.43, 0.55, 0.73, and the corresponding PE is 179, 140, and 105 times. The first coverage is rated as an increase in holdings.
Risks suggest that the market expansion of new products falls short of expectations; the risk of uncertainty about the implementation of additional issues
