Key points of investment
Incident: The company released the 2023H1 performance report. 2023H1 achieved revenue of 1,501 billion yuan, an increase of 9.71% over the previous year; realized net profit of 295 million yuan, a year-on-year decrease of 738.32%; realized non-net profit deducted - 295 million yuan, a year-on-year decrease of 735.21%. In a single quarter, 2023Q2 achieved revenue of 794 million yuan, up 6.38% year on year; realized net profit attributable to parent - 192 million yuan, a year-on-year decrease of 308.95%; realized non-net profit deducted - 192 million yuan, a year-on-year decrease of 309.04%.
The revenue side continued to grow, and the company's net profit declined in the first half of the year due to increased investment in R&D. On the revenue side, the company's revenue continued to grow in the first half of the year; on the cost side, the company's business restructuring led to an increase in the share of the smart driving business with low gross margin (nearly 10%), so the company's gross margin declined compared to the same period last year; on the cost side, the company's profit declined due to the increase in operating expenses and R&D investment in the company's various businesses. 23H1's comprehensive cost ratio increased by 6.43 pct over the same period last year. Among them, R&D investment increased, an increase of 26.70% over the previous year. Looking at it specifically,
1) Zhi Yun: 23H1 achieved revenue of 888 million yuan, an increase of 3.63% over the previous year. During the reporting period, the company released the first scenario map and implemented the application. At the same time, data compliance services were successfully implemented in multiple projects. In June, the company became the first enterprise in the country to obtain the National Urban Ordinary Road Advanced Driver Assistance Map review number. A total of 120 urban advanced assisted driving maps in 30 provinces were approved. It is expected that it will continue to promote Zhiyun's business development in the future.
2) Smart Cabin: 23H1 achieved revenue of 242 million yuan, a year-on-year decrease of 17.90%. The first version of the company's lightweight passenger car travel product has completed road tests, and the navigation SDK software product has already been launched. At the same time, commercial vehicle smart cabin instruments have been mass-produced in various SAIC Maxus models.
3) Zhixin: 23H1 achieved revenue of 223 million yuan, an increase of 4.94% over the previous year. The company's chip shipments have continued to increase. Jefa Technology's cumulative SoC chip shipments have exceeded 75 million units, assembled more than 75 million cars worldwide, and the AC8015 cockpit chip developed by the company has achieved mass production in both domestic and overseas models. Meanwhile, the company's new MCU products have entered the mass production stage, and the AC8025 cockpit chip will be mass-produced in 2024.
4) Smart driving: 23H1 achieved revenue of 144 million yuan, an increase of 41999.87% over the previous year. During the reporting period, the company's smart driving products with scene map functions were commercialized and applied to NOH in the last few cities. At the same time, the company has formed strategic cooperation with Horizon, Renesas, etc., and has achieved mass production of front-view all-in-one solutions based on Horizon Journey 2 on various models.
The company continues to develop smart core and smart driving business. 1) Zhixin, the AC8015 cockpit SoC chip, a subsidiary of Siwei, has shipped more than one million units, and has cooperated with more than 90% of own-brand car companies/Tier 1 to be used in cockpit products including virtual LCD meters, one-core multi-screen screens, and AR-HUD. Among them, the AC8015M virtual LCD instrument scheme has received project targets from many OEMs. At the same time, the AC7802X automotive-grade MCU chip was officially mass-produced and delivered to a number of benchmark customers for large-scale applications. 2) Smart Driving. The company has signed a cooperation with Horizon. Currently, it has launched an L2 front-view plan based on Journey 2, and has achieved mass production of various models. In the future, the two sides will further deepen cooperation and create advanced smart driving solutions through four-dimensional intelligent driving capabilities and the Journey 5 chip.
Investment suggestions: As passenger car sales pick up, mass production of the company's smart cabin, smart driving, and smart chip related products will continue to empower the company's performance to grow. It is estimated that the company will achieve revenue of 41.13/5396/6.892 billion yuan in 23-25, respectively, and net profit of -2.56/0.53/140 million yuan, covered for the first time, giving the company a “increase in holdings” rating.
Risk warning: business development falls short of expectations; policy implementation falls short of expectations; automobile sales fall short of expectations.