The company has the first-mover advantage and leading position in the domestic Ethernet switching chip market. The company is mainly engaged in the research, development, design and sales of Ethernet switching chips and supporting products, and is one of the few domestic enterprises that can provide a full range of solutions from switching core chips to independent security system platform. related products break the long-term monopoly of international giants. According to Zuoshi Consulting, in 2020, the company's market share in China's commercial Ethernet switching chip market was 1.6%, and the company's market share in China's commercial 10 Gigabit and above Ethernet switch chip market accounted for 2.3%. They all rank first among the domestic manufacturers in China's commercial Ethernet switching chip market.

It is expected that the development of data center and vehicle Ethernet will continue to expand the demand for Ethernet switching chips. According to Canalys data, 23Q2's domestic expenditure on cloud infrastructure services reached US $8.7 billion, an increase of 19% year-on-year and 13% month-on-month. According to Yiou think tank, the size of China's marginal computing market is expected to increase from 62.3 billion yuan in 2022 to nearly 200 billion yuan in 2025, with an average annual compound growth rate of 47 percent from 21 to 25. The development of cloud computing and edge computing brings huge demand for data center construction, which contributes to the expansion of Ethernet switching chip market. In addition, the automotive electronic architecture is constantly evolving. According to Zoz Auto Research, the market size of in-vehicle Ethernet switches / physical layer chips is about US $800 million in 2023, and it is expected that an average of 2-4 Ethernet switch chips will be used per bike in 2028. This will drive the market size to US $2.5 billion.

The company has advantages in technology and customer resources, and is expected to maintain a leading position in the industry. The company is the leader of Ethernet switching chip in China, and its products have been successfully introduced into Xinhua 3, Ruijie Network and Maipu Technology, and are expected to continue to benefit from the development of the industry. At the same time, the Arctic series under research can be on a par with the highest international level, with a maximum switching capacity of 25.6Tbps, support for a maximum port rate of 800G, and advanced features such as enhanced security interconnection, enhanced visualization and programmability, which will further enhance the competitiveness of the company's products.

Profit forecast: the company's 23-25 net profit is expected to be-0.36 yuan, 0.27 billion yuan, compared with the same period last year,-23.1%, "173.9%," 65.3%. With reference to the comparable company's average valuation of 23.30 times PS in 2023, considering that the company is the leading Ethernet switching chip in China, benefiting from the rapid development of data center construction and vehicle Ethernet, it is expected to maintain high growth and cover for the first time, giving it a "overweight" rating.

Risk hint: new product research and development is not as expected, supplier concentration is high, and fund-raising projects are not as expected.