Incident: On the evening of August 28, Fengyi Technology released its 2023 annual report. The company achieved revenue of 179 million yuan (YoY +6.47%) for the first half of 2023, net profit of 83 million yuan (YoY -0.55%), net profit of 54 million yuan (YoY -21.96%) after deducting net profit from non-attributable income. Corresponding to the 2Q23 single quarter, the company achieved revenue of 190 million yuan (YoY +11.41%, QoQ +1.95%), net profit of 43 million yuan (YoY -4.82%, QoQ +8.75%), net profit of 225 million yuan (YoY -20.24%, QoQ -10.36%).
Focusing on BLDC motor drive control chips, 23H1 achieved steady revenue growth. Fengping Technology focuses on high-performance BLDC motor drive control chips. The products cover all key chips for motor drive control. It has accumulated wealth in the three fields of chip technology, motor drive architecture technology, and motor technology. Downstream covers various fields such as smart home appliances, white appliances, cooling fans, power tools, sports mobility, industry and automobiles. In the first half of 2023, with the economy and society fully returning to normal operation, the company started from various aspects such as technology research and development, market expansion, and talent training, etc., and strived to promote comprehensive business development, achieving revenue of 179 million yuan, an increase of 6.47% over the previous year; gross profit margin was 53.39%, down 4.03 pct from the full year of '22; net profit margin was 46.49%, up 2.52 pct from the full year of '22. Despite weak industry demand and increased competition, the company maintained overall profit stability.
Deeply cultivate emerging markets such as automobiles and industry, and cultivate new engines for development. In the first half of 2023, while consolidating existing application fields, the company continued to cultivate new application markets and focus on cultivating and developing new engines. 1) Automotive electronics market: In '22, the company's vehicle regulation products have passed AEC-Q100 certification, and have been shipped in small quantities to automakers and Tier 1 manufacturers. They are mainly used in applications such as air intake grilles, sunroofs, air conditioning fans, and water pumps. In the first half of 2023, the company passed the ISO 26262 functional safety management system certification, and the growth of the automobile market accelerated. 2) Industrial and robot market: Motors are the core component of robot motion control systems and are widely used in robots. Fengping has accumulated deep technology in the field of BLDC motors, and its products have been used in industrial robots such as sweepers and robotic arms. Currently, the company's research projects include “R&D of key technologies for high-performance servo motion control chips”, which are mainly used in high-end robots, linear motors, and other servo control fields, which have pioneering and scarce advantages in the industrial and robotics fields.
Increase investment in R&D and actively expand the global market. In the first half of 2023, the company increased its cutting-edge layout in emerging fields and continued to invest in fields such as automotive-grade chips and industrial control. The total R&D investment was 32 million yuan, an increase of 51.4% over the previous year. R&D investment accounted for 18.1% of revenue, an increase of 5.37 pct over the previous year. At the same time, the company's overseas development strategy continued to advance. In the first half of 2023, the company focused on promoting overseas market expansion, starting with strengthening overseas technical team support, developing overseas partners, and brand promotion.
Investment suggestions: The company's net profit for 23-25 is estimated to be 161 million yuan, 203 million yuan, and 254 million yuan respectively, corresponding to the current market value PE of 63/50/40 times, respectively. Considering the continuous increase in the BLDC motor market penetration rate, the company has core technology and high product cost performance in the field of BLDC motor control chips, and is expected to maintain rapid growth and maintain its “recommended” rating.
Risk warning: Downstream demand recovery falls short of expectations; R&D progress falls short of expectations; new customers and new market development fall short of expectations; risk of increased market competition.