The product attribute limits the scale of BIOS firmware, and the global market is monopolized by AMI, Phoenix and Insyde.
The relatively low value and durability limit the scale of BIOS firmware, and the requirements for compatibility and stability of BIOS are much higher than the improvement of performance. the low investment willingness of manufacturers makes the intergenerational upgrade cycle of BIOS firmware relatively long, which makes it difficult for the industry to appear new disruptors. By 2021, the global PC BIOS market size is about 5 billion yuan, and there has not been much growth in the past decade. The server firmware scale is 30-4 billion yuan, and the server CAGR is 5% in 2012-2021, which makes the firmware growth rate relatively stable. In the international market, the current global mainstream X86 architecture BIOS firmware products and technologies have long been monopolized by AMI, Phoenix in the United States and Insyde in Taiwan.
The localization rate of server / PC components will be improved, and domestic firmware manufacturers will face a historic opportunity by superimposing the release cycle of domestic servers and PC (Xinchuang, East and West). The overall size of firmware in the domestic market is about 2 billion. Under the background of the increase in the localization rate of server / PC components, Xinchuang has brought PC and server volume, and the demand has been further expanded, which is expected to bring opportunities for domestic firmware. According to the data of Huajing Industrial Research Institute, according to the disclosed plans, some of the computing hub nodes are planned to achieve more than 100% rack growth during the 14th five-year Plan period.
The company is the domestic scarce X86 firmware leader, efficiency to improve business expansion to build a new growth curve. The company is one of the four independent suppliers of X86 architecture CPU firmware in the world, and has the ability to develop CPU architecture BIOS products such as ARM, MIPS, Alpha, etc., which can meet the needs of domestic, independent and controllable key links. The company's firmware business mainly sells products to domestic machine manufacturers, and the proportion of licensing fees in the firmware business is expected to continue to increase, thus promoting gross profit margin, which does not require a lot of fees, and profit margins are expected to continue to improve. In 2007, the company began to cooperate with great wall, Huawei, dawning, mega core and other domestic head chip manufacturers, and the volume of domestic PC, server and IOT products superimposed with multi-architecture adaptation capability is expected to bring high business growth.
Investment suggestion: we estimate that the company's operating income in 2022 and 2024 will be 2.656 million yuan, an increase of 11.9%, 46.0% and 41.7%, respectively, over the same period last year. The net profit returned to the home will be 0.47 million yuan, an increase of 63.2% and 58.8% over the same period last year. We choose Xinchuang leading China Software, Tuo Wei Information, and Nanwei Software, the leader of government information, as comparable companies. Considering that the company is the leader in firmware industry segmentation, we give the company 70 times PE in 2023, with a target price of 60.90 yuan. Cover for the first time, giving a "push" rating.
Risk Tip: unable to continue to be authorized by Intel Corp; downstream Xinchuang server, PC shipments are not as expected; industry competition intensifies.