Incidents:

The company released its 2022 annual report in April 2023. It achieved operating revenue of 1,182 million yuan in 2022, an increase of 49.01% over the same period of the previous year, and the net profit of the mother was 300 million yuan, an increase of 98.13% over the same period last year. The basic earnings per share were 0.54 yuan/share.

Revenue and net profit returned to the mother grew rapidly

Benefiting from growing market demand in the integrated circuit industry and strong overall demand in the satellite navigation and location service industry, the company's operating income and net profit in 2022 increased rapidly. Accounts receivable and notes receivable amounted to $1,010 million, an increase of 59.11% over the previous year due to the continued increase in sales scale and the increase in payments not yet paid by customers at the end of the period compared to the beginning of the period.

Domestic integrated circuit market space continues to expand

According to statistics from the China Semiconductor Industry Association, sales of China's integrated circuit industry were 12,0061 billion yuan in 2022, an increase of 14.8% over the previous year. Among them, sales of the design industry were 515.62 billion yuan, up 14.1% year on year; manufacturing sales were 385.48 billion yuan, up 21.4% year on year; sales of packaging and testing industry were 299.51 billion yuan, up 8.4% year on year, a record high.

New integrated circuit products continue to be introduced

The company has formed 6 series of more than 300 core products and continues to iterate on new products. In terms of key components of Beidou, the new generation of Beidou baseband chips completed prototype verification and began back-end design; in terms of converters, the company completed development and commercialization of various converter chips, and began the definition and development of next-generation upgraded products. The company continued to increase investment in R&D, with R&D expenses of 137 million yuan in 2022, an increase of 18.82% over the previous year; higher R&D investment provided a continuous guarantee for the company's new product launch.

Profit Forecasts, Valuations, and Ratings

Considering factors such as the growth in demand for Beidou terminals, we expect the company's revenue in 2023-2025 to be 16.06/2191/2,733 billion yuan (the original value of 23-24 was 1,543/2,127 million yuan), up 35.84%/36.39%/24.79%, with a three-year CAGR of 32.23%; Guimu's net profit of 3.98/5.39/670 million yuan (the original value of 23-24 was 422/598 million yuan), an increase of 32.54%/35.47%/24.33% over the previous year, three years CAGR is 30.69%, EPS is 0.70/0.95/1.19 yuan/share, and the current price corresponding to PE is 39x/29x/23x, respectively. Considering that the company's converters and Beidou's key device technology are advanced domestically, the company was given 45 times PE in 2023, corresponding to the target price of 31.71 yuan, maintaining the “increase in holdings” rating.

Risk warning:

Product development progress falls short of anticipated risks; competition in the satellite navigation market intensifies; risk of shareholder litigation; risk of government subsidies falling short of expectations; risk of insufficient corporate cash liquidity.