Core viewpoints

Revenue in the first half of 2023 was 345 million yuan, down 36.55 percent from the same period last year, and the net profit was-7 million yuan, down 106.14 percent from the same period last year. The company is the leader of domestic GPU, with a solid position in the field of military graphics display and control, and is expanding from airborne to shipboard and vehicle-borne fields, with permeability expected to further improve and sustainable growth; miniaturized radar is expected to benefit downstream models to usher in the outbreak of demand; general chip products downstream domestic replacement demand remains unchanged, performance is expected to repair. The company will increase its R & D investment against the cycle and increase the development of high-performance general-purpose GPU chips, which is expected to open the company's growth ceiling and have a broad market space in the future.

Event

On August 30, 2023, the company reported that revenue in the first half of 2023 was 345 million yuan, down 36.55 percent from the same period last year, and the net profit was-7 million yuan, a decrease of 106.14 percent over the same period last year.

Brief comment

1. A variety of external unfavorable factors, short-term pressure on the company's performance

Recently, the company reported that revenue in the first half of 2023 was 345 million yuan, down 36.55 percent from the same period last year, and the net profit was-7 million yuan, down 106.14 percent from the same period last year. The net profit after deducting non-return was-25 million yuan, down 124.05 percent from the same period last year. The company's revenue and net profit declined to a certain extent, mainly due to macroeconomic fluctuations, downstream industrial demand fluctuations, changes in sales structure and other factors, resulting in the decrease of product income in the chip field and graphics display and control field.

2. comprehensive profitability remains stable, continue to strengthen research and development efforts to maintain core advantages, the company's gross profit margin in the first half of the year was 62.29% (+ 0.32pct), gross profit margin increased steadily. The cost for the period was 254 million yuan (+ 24.21%), and the expense rate was 73.62% (+ 35.97pcts), of which the sales cost was 32 million yuan, an increase of 42.69% over the same period last year, and the expense rate was 9.28% (+ 5.22pcts), mainly due to the increase in market expansion activities in the reporting period; the management cost was 58 million yuan, an increase of 4.55% over the same period last year, and the expense rate was 16.81% (+ 6.49pcts). The R & D expenditure was 166 million yuan, an increase of 23.77% over the same period last year, and the expense rate was 48.25% (+ 23.44pcts). The main reason was that the company continued to increase its R & D investment; the financial expenses were-2 million yuan, an increase of 73.72% over the same period last year, mainly because the bank interest income of the company in the reporting period decreased compared with the same period last year.

3. The position of military map display and control is firmly expanded to expand downstream applications, and the advantage of small special radar is expected to benefit from the model volume graphic display and control module is the "brain" of information fusion and display processing. It is the company's earliest research and development, the deepest accumulation, but also the core product at present. The company successfully developed a series of GPU chips with completely independent intellectual property rights, and developed a series of graphics display and control module products based on the company's independent GPU chip, which has significant competitiveness in the market promotion. At present, the company's graphics display and control products are mainly used in the special market, and will continue to develop applications in the general market in the future. In recent years, the company has carried out technological innovation and product expansion according to the application needs of different industries, and achieved obvious leading advantages in the airborne field, while the company has actively extended to other fields. for a wider range of vehicle, ship display and control and general market and other application fields, continue to develop and provide appropriate graphics display and control modules and their supporting products.

The company began to accumulate technology in microwave and signal processing earlier, and has a certain technology first-mover advantage in the field of small specialized radar. The company integrates a number of technologies and has developed a series of radar products such as active protection radar and speed radar to meet the diversity of customer needs and enhance the company's core competitiveness. On the basis of consolidating the original plate and module business, the company combed and integrated the products and technology, and developed a series of wireless communication products and electromagnetic spectrum products, including ad hoc networks. gradually realize the development strategy of changing from module-level products to system-level products, and continuously improve the company's profitability and sustainable development ability. In the future, it is expected to benefit from the release of relevant models downstream.

4. With a definite increase in the field of high-performance general-purpose GPU, it is expected to open the AI computing market company to release a targeted additional issuance plan in the near future, raising a total of no more than 3.973 billion yuan for high-performance general-purpose GPU chip research and development and industrialization projects and general GPU advanced architecture R & D center construction projects. This fund-raising investment project will jointly build the company's dedicated packaging and testing production line with third-party chip packaging and testing manufacturers to promote GPU products to break through the existing process process restrictions; it will also be oriented to meet the important direction of future high-performance computing and data processing needs, through the research and development of high-performance computing core architecture and other topics to enhance the company's further in-depth layout in the field of high-computing chips. And will effectively alleviate the company's financial pressure, reduce the company's asset-liability ratio, optimize the financial structure, and enhance the company's financing capacity.

The company's current products are mainly used in the traditional graphics processing field, this investment project is expected to help the company to enter the field of high-performance general GPU. At present, AI large model brings huge demand for computing power. High-performance general-purpose GPU, as one of the basic hardware to achieve computing power, is the current mainstream AI chip product type, high-performance GPU chip may have a huge market space.

5. the R & D investment and talent reserve continued to increase, and the long-term incentive mechanism continued to consolidate in the first half of 2023. In the first half of 2023, the company continued to increase R & D investment around graphics processing chip-related products and small specialized radar products. The company's R & D expenditure was 166.49 million yuan, an increase of 23.77% year-on-year, accounting for 48.25% of the company's operating revenue. The company actively adjusts the structure of R & D personnel, expands the development channel of high-potential talents, and absorbs national and even global high-level talents. As of June 30, 2023, the company has a total of 1296 employees, including 873 R & D personnel, accounting for 67.36% of the total employees. The company has a total of 439 graduate students and above, accounting for 33.87% of the total employees. The continuous increase of R & D investment will help the company to maintain its own technological advantages and lay the foundation for the company's long-term development. The continuous and smooth implementation of the company's equity incentive will help the company to fully mobilize the enthusiasm of its employees, bind the company's core team, and improve the certainty of future performance.

6. The stable growth of military business is expected to usher in the outbreak of demand, and the future of high-performance general-purpose GPU chips is broad. Given the "increase" rating company, it is the domestic leader in GPU, with a solid position in the field of military graphics display and control, and is expanding from airborne to shipborne and vehicle-borne fields, the permeability is expected to further increase, and sustained growth is expected; miniaturized radar is expected to benefit downstream models to usher in the outbreak of demand. General chip products downstream domestic replacement demand remains unchanged, the performance is expected to be repaired. The company will increase its R & D investment against the cycle and increase the development of high-performance general-purpose GPU chips, which is expected to open the company's growth ceiling and have a broad market space in the future. It is estimated that the company's homing net profit from 2023 to 2025 is 0.14,0.19 and 25 million yuan respectively, an increase of-95.08%, 34.13% and 31.38% respectively over the same period last year. The previous share price PE is 2257.1, 1682.7 and 1280.6 times respectively, and is rated as "overweight".

Risk analysis.

1. The expansion of the civil market is not as expected. The company implements the military-civilian two-wheel drive strategy, the civil market due to more fierce competition, market expansion may not smoothly affect future performance growth.

2. The risk of technological innovation and product development. Chip design belongs to technology-and intelligence-intensive industries, and technology development and process innovation are the key factors that affect the core competitiveness of enterprises. If the company can not correctly judge the development trend of future products and markets, can not timely control the development trends of key technologies in the industry, can not adhere to technological innovation or technological innovation can not meet the market demand, there will be the risk of lagging technological innovation and declining competitiveness.

3. The change of competition pattern is uncertain. The competition pattern of the industry is constantly evolving, the market risk is increasing, and the uncertainty is increasing.