Event

On August 25, 2023, the company released the semi-annual report of 2023. From January to June in 2023, the company achieved operating income of 221 million yuan, an increase of 5.46% over the same period last year. The net profit returned to the home was-37 million yuan, down 161.19% from the same period last year.

Main points of investment

Expand the layout to increase investment, 23H1 performance under short-term pressure. In the first half of 2023, the company achieved operating income of 221 million yuan, an increase of 5.46% over the same period last year, and its net profit was-37 million yuan, down 161.19% from the same period last year. Of this total, Q2 realized revenue of 85 million yuan, down 46.96% from the same period last year, and Q2's net profit decreased by 37.86% from the previous month to-10 million yuan, down 117.28.86% from the same period last year and up 60.93% from the previous year. By application field, 23H1's information security income was 61.1633 million yuan, down 41.85% from the same period last year; automotive electronics and industrial control revenue was 47.7329 million yuan, up 0.36% from the same period last year; and marginal computing and network communications revenue was 111 million yuan, up 104.39% from the same period last year.

In the first half of the year, IP's licensing revenue decreased and market competition intensified, resulting in lower product prices and increased production costs such as wafers. The company's business income gross profit margin fell to 25.55%, a decrease of 27.85 pcts compared with 53.40% last year. In the first half of the year, the company continued to build the core competitiveness of its products, and all three expenses increased significantly, of which the company's R & D expenses increased by 92.29% year-on-year to 110 million yuan, and the overall R & D staff increased from 170last year to 294this year.

Sufficient orders on hand, high certainty of performance in the second half of the year. As of June 30, 2023, the amount of orders on hand is 543 million yuan. According to the application field, the order amount of automotive electronics and industrial control business is 73 million yuan, that of Xinchuang and information security business is 57 million yuan, and that of edge computing (high performance computing) and artificial intelligence business is 413 million yuan.

Focus on key areas and customers to expand market influence with localized services. (1) Automotive electronic chips: the company increases market promotion and actively expands important customers in the fields of on-line chassis, domain control, airbags and vehicle networking information security. automotive electronic chips have been introduced into BYD, Chery, Geely, SAIC, Changan, Great Wall, FAW, Dongfeng, XPeng Inc. and many other automotive manufacturers to achieve batch application in more than 20 independent and joint venture brand cars. (2) Xinchuang and information security chips: the company actively layout and carry out artificial intelligence chip research on the edge side of the CPU+NPU framework, combined with the demand characteristics of intelligent POS master control and face door lock master control, actively launch competitive chips in the above areas, gradually give play to advantages in cloud security and end security, broaden downstream areas and seize market share. (3) Raid memory management chip: at present, the company has successfully developed the Raid control chip CCRD3316, which supports 16 independent SATA3.0 interfaces, increases the performance frequency of DDR to up to 1600MHz, optimizes and adds 4 sets of Raid algorithm engines, enhances the power-off protection and recovery mechanism to deal with exception handling, and improves the hardware compatibility of hard disk. The performance is equivalent to that of LSI 9361 series, and the domestic substitution of similar products can be realized. Break the long-standing situation that Raid control chips have been monopolized by foreign companies.

Investment suggestion

From 2023 to 2025, we expect the company to achieve an income of 8.35 yuan, respectively, 14.52 yuan per 2.337 billion yuan, and a net profit of 0.53 trillion yuan, respectively. The current stock price corresponds to 194,65 and 35 times of PE in 2023-2025, respectively, and is given a "buy" rating.

Risk Tips:

The recovery of market demand is not as expected; the progress of new products is not as expected; the market competition is intensified and so on.