Q2 performance has improved significantly. According to the semi-annual report released by the company on August 2, 2023H1 achieved a revenue of 1.184 billion yuan,-2.37% compared with the same period last year, and its net profit was 22 million yuan, + 49.89% compared with the same period last year. The net profit was 2.0926 million yuan after deducting it, an increase of 15.5229 million yuan over the same period last year. Of this total, Q2 achieved revenue of 644 million yuan (YoY-1.17%,QoQ+19.48%), net profit of 94 million yuan (YoY+713.02%, reversal), and non-return net profit of 80 million yuan (YoY+888.46%, reversal).
The scale effect of the mass production business appears, which promotes the further improvement of profitability. 2022H1's one-stop chip customization business income was 779 million yuan, + 1.70% compared with the same period last year, of which the mass production business income was 532 million yuan, + 13.56% compared with the same period last year, and the gross profit contribution rate increased to 25.28% from 19.51% in the same period last year. Benefiting from the change in income structure and the further appearance of the scale effect of mass production business, 2023H1's comprehensive gross profit margin increased to 47.65%, an increase of 6.01% over the same period last year, of which Q2 comprehensive gross profit margin increased to 54.94%, reaching an one-quarter peak since listing.
Core IP contribution flexibility, continue to enhance the value of products. 2023H1 semiconductor IP licensing service revenue was 447 million yuan,-10.65% compared with the same period last year, of which intellectual property license royalty revenue was 345 million yuan, down 11.49% Q1 intellectual property license royalty revenue fluctuated due to customer project start-up arrangements, while Q2 achieved revenue of 244 million yuan in a single quarter, a sharp increase of 141.44% compared with the previous quarter. Graphics processor IP (GPU IP), neural network processor IP (NPU IP) and video processor IP (VPU IP) are the company's core IP,2023H1 accounting for nearly 80% of semiconductor IP licensing business revenue. Although the number of IP licenses decreased in the first half of the year, the average single intellectual property license revenue increased by 21.88% compared with the same period last year.
There is a significant growth rate in the areas of the Internet of things and data processing, with sufficient orders on hand. The downstream areas of the company are mainly the Internet of things, followed by consumer electronics, data processing, automotive electronics, computers and peripheral and industrial fields. The Internet of things of the company is dominated by one-stop chip customization service business, with the overall revenue growth rate of 2023H1 reaching 47.00%; semiconductor IP authorization business is mainly used in data processing, computer and surrounding fields, and the revenue growth rate of 2023H1 semiconductor IP authorization business in the above areas is 131.09% and 10.74%, respectively. Benefiting from the growth of AI, Internet of things, data center and other markets and the increased demand for independent core making by system manufacturers, Internet enterprises and cloud service providers, the downstream demand of the company is sufficient. By the end of the reporting period, the amount of orders on hand was 2.137 billion yuan, and the amount of orders that could be converted within one year reached 1.405 billion yuan, accounting for 65.73%.
Sustained high R & D investment, casting long-term core competitiveness. In 2022, the company's IP licensing business ranked first in market share and seventh in the world in terms of market share of Chinese mainland, and fifth in royalty revenue from intellectual property rights. Sustained high R & D investment is the key for the company to maintain its long-term core competitiveness. 2023H1 invested 442 million yuan in R & D, accounting for 37.32% of revenue, an increase of 3.32% over the same period last year. At present, in the field of AIGC, companies have launched GPGPU IP and AI GPU IP subsystems to meet a wide range of artificial intelligence computing needs. The company's low-power Bluetooth solution for Internet of things applications has completed Bluetooth 5.3 certification in June. In addition, the company also continues to enhance the industrial value of the company's semiconductor IP authorization and chip customization business and expand the market space from the aspects of Chiplet chip architecture and interface IP.
Investment advice: the first time to cover the "overweight" rating. The company has the advantages of integrated platform for semiconductor IP, chip customization and software support, and its profitability is released and growth flexibility is expected. it is estimated that the company's EPS in 2023, 2024 and 2025 is 0.17,0.32,0.41 yuan respectively, corresponding to PE 371,200,155 times. For the first time, the overweight rating was given.
Risk tips: macro progress downward, R & D progress is not as expected, downstream demand is not as expected.