Event: the company announced that 2023H1 realized revenue (3.735 billion yuan, + 28.56%), net profit (1.392 billion yuan, + 16.22%), gross margin (64.759,-1.02pcts), net profit (37.31%,-4.14pcts) 23Q2 realized revenue (2.194 billion yuan, year-on-year + 40.31%, month-on-month + 42.39%), net profit (808 million yuan, year-on-year + 21.15%, month-on-month + 38.47%), gross profit margin (63.42%, year-on-year-3.96pcts, month-on-3.22pcts), net profit rate (37.06%, year-on-year-5.83pcts, month-on-0.60pcts).
Deep ploughing in the field of integrated circuits, an important supplier of special integrated circuits in China. The company is a domestic comprehensive integrated circuit company, with special integrated circuits and intelligent security chips as its two main industries, while laying out quartz crystal frequency devices and semiconductor power devices. The company has been deeply cultivated in the field of integrated circuit design for more than 20 years. With a systematic competitive advantage, the company is one of the important suppliers of domestic special integrated circuits, with users in all related fields.
The index of income and profit hit a new high, achieving sustained growth at a high base. 2023H1 company overcame multiple adverse factors, income (3.735 billion yuan, + 28.56%), return to the mother net profit (1.392 billion yuan, + 16.22%) still achieved sustained growth at a high base, and set a new high. Looking at 23Q2 alone, the company's revenue (2.194 billion yuan, year-on-year + 40.31%, month-on-month + 42.39%), net profit (808 million yuan, year-on-year + 21.15%, month-on-month + 38.47%) continued to grow significantly, gross profit margin (63.42%, year-on-year-3.96pcts, month-on-3.22pcts), net profit margin (37.06%, year-on-year 5.83pcts, month-on-0.60pcts) slightly decreased, mainly due to the decline in gross profit margin of crystal components business. However, the overall profitability remains strong. The company is divided into product business: 1. Special integrated circuit business: 2023H1, realized revenue (2.164 billion yuan, year-on-year + 10.79%; revenue accounted for 57.94%,-9.29pcts), gross profit margin (77.54%, year-on-year-1.10pcts). Mainly due to the improvement of the efficiency of the company, the continued growth of the shipping scale, the optimization of the production process and the strengthening of quality control, the company has improved the level of production automation, supply capacity and customer response speed. Specific areas: ① FPGA: products continue to maintain a leading position in the industry market, the range of users continues to expand, and the research and development of new-generation higher performance products is progressing smoothly and is about to be completed; ② special memory: the newly developed special Nand Flash has been introduced to the market, and the special new memory will be launched soon. ③ high-performance bus: new products enter the promotion stage, all kinds of interface products are constantly updated, and the market share continues to take the lead; ④ special SoPC platform products: third-and fourth-generation products have also been completed and promoted; ⑤ MCU, image AI smart chips: related products have been completed research and development, began to promote ⑥ digital signal processor DSP, video chip: the development of related products is progressing smoothly and will soon enter the company's new special processor product series in the future; ⑦ analog products: provide users with a complete set of secondary power solutions, rapidly expanding market share. The newly launched high-speed RF ADC has been recognized by major users in the first half of the year.
2. Intelligent security chip business: 2023Hl, realized revenue (1.462 billion CNY, + 81.99%; revenue accounted for 39.15%, minus 11.50 pcts), gross profit margin (49.32%, minus 7.66 pcts). The business is growing rapidly, and the company continues to expand the industry market in many fields, such as finance, telecommunications, identification, Internet of things and so on. For the substantial increase in the company's gross profit margin, we believe that it is mainly due to the rapid expansion of the company's overseas market, and the contribution of the overseas market with faster growth rate (59.62%, year-on-year + 20.25pcts) to revenue (350 million yuan, year-on-year + 48.90%) has increased. From the specific business point of view: ① eSIM-station solution: support wafer level personalized data writing, compatible with remote eSIM configuration, 5G connection, and obtain GSMA SAS-UP qualification certificate; ② car digital key scheme: has been successfully introduced in the client to achieve mass production and loading, which is the company's new growth factor in the future. ③ Telecom SIM, bank cards, second-generation identity cards, electronic travel documents: chip shipments as a whole maintained steady growth.
3. Crystal components business: 2023H1, realized income (90 million yuan, 33.35%; income accounts for 2.42 mai 2.25 pcts), gross profit margin (17.08% mai 10.47 pcts). The decline in business was mainly affected by the macroeconomic downturn and the cyclical downturn in the industry. However, the company continues to strengthen the research and development of miniaturized, high-frequency and high-precision products and key common technologies for industrialization, SMD1612 OSC ultra-small size oscillator and other products have been successfully developed, and the industrialization project of "5G communication module with high fundamental frequency quartz crystal oscillator" has also successfully passed the acceptance test, actively expanding the market and improving the quality of development.
4. Semiconductor power device business: the company actively distributes the foundry resources and makes a breakthrough in the OEM resources of 12-inch IGBT, SGT and SJMOS. At the same time, with the help of the internal and external industrial synergy of Ziguang Group to achieve the introduction of certification and mass production of a number of products; strive to expand new energy vehicles, photovoltaic micro-inverse, special power supply and other markets, business income to achieve counter-trend growth.
The third rate was the lowest in the same period of the decade: the third rate of 2023H1 (7.46%, year-on-year-0.94pcts) further decreased, mainly due to the sales expense rate (4.06%,-0.33pcts) and the financial expense rate (0.35%, 0.60pcts). Specifically, the growth rate of sales expenses (152 million yuan, + 18.95%) is lower than the income growth rate, the management expenses (140 million yuan, + 28.32%) are basically the same as the income growth rate, and the financial expenses (- 13 million yuan,-272.91%) are significantly reduced. This is mainly due to the increase in the scale of monetary funds held by the company and the increase in fund management income, resulting in an increase in interest income over the same period last year.
R & D investment continues to increase to ensure core technology advantages: the company 2023H1 continues to increase R & D investment, and R & D expenses (756 million yuan, year-on-year + 62.36% 6) increase rapidly, mainly due to the increase in the number and salary of the company's R & D personnel, resulting in an increase in labor costs over the same period last year. The long-term growth of R & D investment ensures the company's core technical advantages in the fields of intelligent security chips, such as near-ground communication, security algorithms, security attack and defense, high reliability and so on. In the leading city of special integrated circuits, the company has mastered the architecture design, instruction set design and implementation technology of highly reliable microprocessors, and launched a high performance system integration product (SoPC) with field programmable function. In the field of quartz crystal frequency devices, the company has mastered a full range of quartz piezoelectric crystal production technology and launched high-end products such as high fundamental frequency crystals and miniaturized crystals for 5G terminals, 0CX01409 constant temperature oscillators and miniaturized VCXO oscillators for 5G communications; in the field of semiconductor power devices, the company can provide a full range of high-performance MOSFET products covering the voltage range 20V-1500V.
Sufficient inventory to ensure production activities: 2023H1's inventory (2.796 billion yuan, + 26.33% compared with the beginning of the period) increased significantly, mainly due to the increase in the scale of the company's integrated circuit business, the increase in inventory and the extension of the acceptance cycle of some customers. Specifically, raw materials (661 million yuan, + 44.31% at the beginning of the period), products in process (494 million yuan, + 2.31% 6 at the beginning of the period), and goods issued (749 million yuan, + 63.77% at the beginning of the period) have all increased significantly. With the company's inventory of raw materials, production and sales of products and commodities issued and confirmation of acceptance, the performance will be thickened in the future into the income statement. The rapid growth of the company's operating cash flow (1.149 billion yuan, + 214.73%) is mainly due to the growth of integrated circuit business and a substantial increase in sales and receipts.
After the share buyback is completed, accelerate the equity incentive. It was announced on March 28, 2023 that it intends to use its own funds to buy back the company's shares for equity incentives or employee stock ownership plans. The first repurchase was carried out through a special securities account for share repurchase on April 25, 2023, and the share repurchase was completed on July 4, 2023, with a total of 6396000 shares repurchased, accounting for 0.75% of the total share capital of the company at that time. The total transaction amount was 600 million yuan. Equity buyback reflects the company's continued optimism for future performance, and the implementation of equity incentives in the future is expected to continue to encourage the company's performance.
Investment suggestion: as an important supplier of special integrated circuits in China, the company has core technology advantages, strong position and systematic competitive advantage. Under the background of independent control, China's special chip field is expected to maintain a high growth rate and rapid development. The company has formed a long-term partnership with mainstream contract manufacturers in the industry to accumulate deep customer resources and have advantages in the supply chain and customers. Is expected to fully benefit. The company's continuous high-intensity R & D investment is expected to strengthen the company's chip design and industrialization capabilities, enrich the company's product range, and make technological breakthroughs to lay the foundation for the company's sustainable development. 3. The company buyback shares are used for equity incentives or employee stock ownership to enhance market confidence.
We estimate that the company's operating income in 20232025 will be 9.014 billion yuan, 1.196 billion yuan and 13.775 billion yuan respectively, the net profit will be 3.175 billion yuan, 3.909 billion yuan and 4.829 billion yuan respectively, and the EPS will be 3.74,4.60 yuan and 5.68 yuan respectively. We maintain the "buy" rating with a target price of 3.909 billion yuan, corresponding to 35 times, 28 times and 23 times PE of the forecast EPS from 2023 to 2025.
Risk hint
Industry competition intensifies, product research and development is less than expected risk, market development is not as expected, market competition continues to intensify, product price decline risk.