Incidents:
The company released its semi-annual report in August 2023. The operating income during the reporting period was 1,796 billion yuan, or 5.52% year-on-year. Net profit to the mother was 449 million yuan, or -15.32% year-on-year, and basic earnings per share were 0.55 yuan.
The revenue growth rate of the FPGA sector remained at a high level. During the reporting period for the increase in inventory book value, the revenue growth rate of company segments was differentiated. FPGA and other product sectors benefit from technology cluster advantages and core technical barriers. The company's revenue is 586 million yuan, up 54.88% year on year; the non-volatile memory sector, the industry is at a low point in the cycle, but the company's products are promoted and applied in CCM, meters, vehicle regulations, etc., with revenue of 588 million yuan, an increase of 20.63% over the previous year; the security and identification product sector, affected by factors such as the sluggish industry market, the company's revenue is 410 million yuan, -11.03%; the smart meter chip sector, power grid system and consumer market are in the inventory digestion cycle. Weak market demand brought the company's revenue to 113 million yuan, or -59.06% year-on-year. Affected by factors such as increasing sales competition in the chip market, the company has gradually expanded its stocking scale to guarantee supply demand. At the end of the reporting period, the company's inventory was 2,848 million yuan, accounting for 50.08% of total current assets; among them, raw materials, products in stock, and inventory goods increased by 213.49%/50.92%/77.70%, respectively, compared to the beginning of the period.
R&D investment has increased, and technical standards have continued to improve
During the reporting period, the company invested 588 million yuan in R&D, an increase of 47.54% over the previous year; among them, there were 964 R&D personnel, an increase of 16.71% over the previous year, and employee remuneration of 328 million yuan, an increase of 26.89% over the previous year. Benefiting from increased R&D efforts, in the FPGA sector, research and development of a new generation of 1 billion gate-level FPGA products is under way. PSoC products have also been successfully mass-produced, and have been applied in batches by many customers. In the storage sector, in the field of EEPROM, the company is promoting the promotion and application of high-performance industrial regulations and vehicle regulation series products; in the NOR FLASH field, it continues to optimize array architectures, high voltage solutions, and erasing algorithms; in the field of SLC NAND, the company is promoting product design and mass production with new process standards.
Profit Forecasts, Valuations, and Ratings
We expect the company's operating income for 2023-2025 to be 36.66/42.46/4.977 billion yuan (original value: 4573/57.52/63.15 billion yuan), corresponding growth rates of 3.59%/15.83%/17.22%, and net profit of 907/13.35/1,881 million yuan (original value of 1,502/18.57/2,469 billion yuan), corresponding to -15.75%/47.17%/40.86%, and EPS 1.11/1.64/ respectively 2.30 yuan/share, 3-year CAGR is 20.43%. In view of the company's advanced FPGA products and the rapid growth rate of sector revenue, referring to comparable companies, the company was given 35 times PE in 2024, with a target market value of 35.833 billion yuan, corresponding to a stock price of 57.23 billion yuan, maintaining the “increase in holdings” rating.
Risk warning:
Market demand falls short of expected risk; technology research and development falls short of expected risk; industry competition increases risk; FPGA R&D falls short of expected risk; risk of inventory price drop.