Description of the event
Recently, Jingjiawei released its semi-annual report for 2023. 2023H1 achieved revenue of 345 million yuan, a year-on-year decrease of 36.55%; realized net profit totaled $08 billion, a year-on-year decrease of 106.14%; realized non-net profit deducted -26 million yuan, a year-on-year decrease of 124.05%. 2023Q2 achieved revenue of 280 million yuan, an increase of 53.68% over the previous year; realized net profit of 63 million yuan, an increase of 32.85% over the previous year; achieved net profit of 56 million yuan after deducting non-net profit of 56 million yuan, an increase of 58.59% over the previous year.
Incident comments
Market fluctuations have dragged down the company's short-term performance, and R&D investment has further increased. 2023H1's revenue for products in the graphic display control field, products in the chip field, and products in the small specialized radar field was 211 million yuan, 43 million yuan, and 76 million yuan respectively. The year-on-year growth rates were -19.52%, -79.21%, and +16.31%, respectively; gross margin was 66.70%, 44.20%, and 65.10%, respectively, with year-on-year changes of -5.47 pct, -3.84 pct, and -7.69 pct, respectively. Affected by policy fluctuations in the company's industry, market demand has shrunk, leading to a decline in sales of the company's chip products. 2023H1's R&D investment reached 166 million yuan, an increase of 23.77% over the previous year, accounting for 48.25% of the company's revenue; the number of R&D personnel in the company reached 873, accounting for 67.36% of the total number of employees. With continuous investment in R&D, the development prospects of the company's GPU chip business are worth looking forward to.
It is proposed to increase the main business to enhance the company's future competitiveness. The company recently announced the “2023 Plan to Issue A-Shares to Specific Targets”. It plans to raise no more than 3,974 billion yuan in capital. The investment projects are high-performance general GPU chip R&D and industrialization projects and general GPU advanced architecture R&D center construction projects. At the same time, the company's current fund-raising investment project will jointly build the company's dedicated packaging testing production line with a third-party chip package testing manufacturer, which will bind the production capacity of advanced packaging processes. As one of the leading GPUs in China, the company has now launched the JM54 series, JM72 series, and JM92 series of third-generation graphics processing chips, which are widely used in computer equipment such as PCs, servers, and graphics workstations. At the same time, we expect to see the smooth implementation of new products this year. General GPUs are the core hardware of AI computing power. The company plans to accelerate the localization replacement process through this fundraising. On the one hand, it will strengthen R&D cooperation with leading domestic companies, and on the other hand, break through the limitations of manufacturing processes by jointly building advanced packaging production lines.
The cornerstone business is developing steadily, and the domestic ecosystem is growing at an accelerated pace. In the field of graphic display control, the company has high technical barriers and a stable competitive pattern. With the rich product matrix and the expansion of application fields, the long-term growth rate is guaranteed. As the innovation market and domestic development enter a period of acceleration, and the strong demand for computing power for AI technology development, the company also plans to participate in the establishment of an industrial investment fund (target scale of 1 billion yuan) to focus on exploring investment opportunities in high-end chips, devices and sensors for industrial control, vehicle regulations, and special market applications. The chip business is expected to accelerate growth. The company is expected to achieve net profit of 367 million yuan, 531 million yuan, and 709 million yuan in 2023-2025. The corresponding price-earnings ratio levels of the current stock price are 92x, 63x, and 47x, maintaining the “buy” rating.
Risk warning
1. The speed at which Xinchuang is advancing is not as fast as expected;
2. There is uncertainty about the implementation of new products.