Incidents:
On October 17, the company issued an announcement to complete the 100% equity settlement of Pioneer Microtechnology. The purchase consideration was 3 billion yen (converted to about 192 million yuan at the exchange rate of December 31, 2019). The company signed an acquisition agreement with Pioneer Microtechnology on March 3, 2020. Due to the impact of the epidemic, the transaction was finally completed via teleconference on October 16.
Comment:
Acquire Pioneer Microtechnology to enhance R&D and design capabilities and consolidate the pace of strategic transformation. Pioneer Microtechnology has long-term accumulated R&D and production capacity for simulation and digital chips in the field of optoelectronic graphics. The acquisition of Pioneer Microtechnology can quickly enhance the company's optoelectronic design R&D capabilities, and jointly build a more competitive IDM business format with its 6-inch production line. Pioneer Microtechnology and Shanghai Xinshi, which the company plans to participate in, jointly form a semiconductor-specific process industry ecosystem in the fields of optoelectronic sensing and power semiconductors, to meet more market needs and increase the utilization value of production lines.
Use market and customer resource advantages to expand chip manufacturing upward. The company has been engaged in electronic component distribution business for a long time, is familiar with market supply and demand conditions, and has many downstream customer resources. When expanding the chip manufacturing business upward, the original resource advantage helps to accurately develop chip products and quickly promote and obtain customer orders and feedback. At the same time, the company's transformation has seized the opportunity to develop third-generation semiconductors, which is conducive to breaking through innovation on the new circuit, rapidly narrowing the gap in the fields of sensing, power, and RF, and entering the forefront. We believe that the completion of this acquisition further clarifies the company's strategic transformation from electronic component distributors to the field of upstream chip manufacturing, forming a clear business layout integrating design, manufacturing and distribution.
Covered for the first time, with a “buy rating”. We are optimistic that this acquisition will help the company's strategic transformation into the upstream chip industry. Combining the advantages of existing resources is conducive to the success of the strategic transformation. We predict that the company's EPS from 2020 to 2022 will be 0.17, 0.23, and 0.36 yuan respectively, and the corresponding PE will be 61, 45, and 29 times.
Risk warning: The epidemic continues to affect industry demand over a long period of time, and the progress of chip R&D and production falls short of expectations.