Focus on the wireless Internet of things chip field, the core product market share is in the forefront of the world: Tailing Micro was founded in 2010, mainly engaged in wireless Internet of things SoC research and development, design and sales. The company has a wide range of wireless Internet of things SoC products, focusing on low-power Bluetooth SoC products, expanding multimode SoC products compatible with a variety of Internet of things application protocols, and in-depth layout of ZigBee protocol class SoC, 2.4G private protocol class SoC, audio SoC products. According to Omdia statistics, in low-power Bluetooth, multi-mode and other sub-areas, the company is the only domestic company ranked top in the world. The company's shipments of low-power Bluetooth chips remained the third in the world in 2019-2021, the fifth in 2020, and the seventh in the world in 2019-2021 for IEEE 802.15.4 related chips (including ZigBee and Thread). The company has accumulated rich end-customer resources around the world, and has formed a stable cooperative relationship with a number of industry-leading mobile phones and peripherals, computers and peripherals, remote controls, home lighting and other manufacturers or their contract manufacturers. The company's products are widely used in Hanshuo, XIAOMI, Logitech, Ouzhi, Tuya Inc., Landvans, Renessa, Skyworth, Sharp, Panasonic, NVIDIA Corp, Harman and a number of other mainstream terminal well-known brands, into the United States Charter, Italy Telecom Italia and other large international operators supply chain, and support and service Baidu, Inc., BABA, Alphabet Inc-CL C, Amazon.Com Inc and many other technology companies in the international and domestic ecological chain enterprise products.

The application scenarios of the Internet of things intelligent industry continue to enrich, and the downstream demand continues to expand: the range of terminal application products corresponding to the company's chips is relatively rich, including electronic price tags, Internet of things gateways, lighting, remote controls, scales, smartwatch bracelets, wireless keymice, wireless audio devices, etc., mainly used in retail logistics, smart home, medical and health and personal devices and other fields. The vigorous development of these fields in recent years has promoted the market demand for IoT connection chips, especially for highly integrated, multi-mode, low-power IoT connection chips. "The mobile economy 2022" released by GSMA

According to the report, the total number of global Internet of things connections is expected to increase from 15.1 billion to 23.3 billion in 2021-2025, with CAGR reaching 11.45% in 4 years. Global Internet of things revenue is expected to increase to US $1.1 trillion in 2025, with CAGR reaching 21.4%. It is estimated that in 2025, the number of Internet of things connections in China will reach 8.01 billion, CAGR will reach 14.1%, and China's Internet of things connections account for more than 30% of the world.

The company's core competitiveness is outstanding, the technology level is the leading in the world, and it is deeply involved in the formulation of industry standards: the company has independent research and development capabilities from microcontroller (MCU) kernel to firmware protocol stack, international leading chip design capabilities and rich chip design experience. The main chip products have reached the global advanced level in many key functions and performance indicators, such as multi-protocol support, system-level architecture research and development, RF link budget, system power consumption and so on. In July 2019, the company was selected as a member of the board of directors of the International Bluetooth Technology Alliance (SIG), deeply involved in the formulation and standardization of international Bluetooth standards, actively promoted the development of Bluetooth technology, and is expected to follow the formulation of specifications and launch iterative products in time to seize the market opportunity.

The company's profitability is stable, and the gross profit margin of the main products remains high: from 2020 to 2022, the company's revenue was 454 million yuan, 650 million yuan and 609 million yuan respectively, with an annual compound growth rate of 15.9%. The non-return net profit was 27 million yuan, 75 million yuan and 35 million yuan respectively, with an annual compound growth rate of 13.8%. From 2020 to 2022, the comprehensive gross profit margins of issuers were 49.84%, 45.97% and 41.27%, respectively. In recent years, the Internet of things market has been strongly encouraged and supported by national policies, and has gradually entered a period of rapid growth, with strong market demand and broad market space, and the gross profit margin of chip products in this segment is relatively high. The gross profit margin of the company from 2020 to 2022 is higher than that of comparable listed companies in the same industry.

Earnings Forecast and valuation suggestion: as of July 31, 2023, the C39 computer, Communications and other Electronic equipment Manufacturing Industry released by the China Securities Index had a static average price-to-earnings ratio of 35.83 times. We estimate that the company's income from 2023 to 2025 will be 6.99,8.39 and 1.018 billion yuan respectively, with a growth rate of 14.79%, 19.97% and 21.38% respectively, and the estimated return net profit will be 0.69,0.90 and 120 million yuan respectively, with an increase rate of 37.65%, 31.21% and 33.35% respectively. We use two valuation methods:

Under the relative valuation method, the company's reference market value range is 44.54-4.797 billion yuan; under the absolute valuation method, the company's reference market value range is 45.17-4.813 billion yuan. After the comprehensive use of the two valuation methods, the forward fair value range of the issuer in the next 6-12 months is 45.17-4.797 billion yuan (taking the coincidence interval of the relative valuation method and the absolute valuation method as the final valuation interval). According to the company's letter of intent, the number of new shares in this public offering does not exceed 60 million shares. Calculated according to the upper limit of the total share capital of the company after the issue of 240 million shares, assuming that the over-allotment option is not used, the value range of each share is 18.8219.99RMB per share, according to the projected net return profit of 2023, the corresponding PE range is 65.92-70.000.According to the deduction of non-pre-homing net profit in 2022, the corresponding PE range is 90.7496.35times. According to the non-return net profit deducted in 2022, the corresponding PE range is 129.79-137.82 times.

Risk hints: the risk that the profit forecast hypothesis is not valid, the lower-than-expected risk of demand in the downstream consumer electronics market, the risk of relative concentration of product structure and market competition, the risk of declining performance, the risk of declining gross profit margin, the small cumulative undistributed profit and the limited business development, the uncertain risk of cash dividend ability, and the risk that the promotion of fund-raising projects is not as expected.

The risk that the valuation level is higher than the average valuation level of the CSI industry and the average valuation level of comparable companies: according to the estimated results, the forward fair value range of issuers in the next 6-12 months is 45.17-4.797 billion yuan, and the PE range corresponding to 2023 net profit is 65.92-70.00 times, which is 54.66 times higher than the consensus forecast of comparable companies in 2023. As of July 31, 2023, the average static price-to-earnings ratio of C39 computer, Communications and other Electronic equipment Manufacturing published by the CSI was 35.83 times, and the company was valued at a higher price-to-earnings ratio than the industry average of the CSI.

Investors should make their own investment decisions and bear their own investment risks.