With international competitiveness of domestic EDA manufacturers, revenue continues to grow rapidly. Founded in 2010, Conrad Electronics is a competitive EDA company in the international market. Its founder, Dr. Liu Zhihong, is the main developer of the famous integrated circuit simulation model BSIM3. He has worked for Cadence and served as the global vice president. The company provides customers with EDA products and solutions that have been widely verified and used by the world's leading integrated circuit design and manufacturing enterprises for a long time. The main products and services include manufacturing EDA tools, design EDA tools, semiconductor device characteristic testing systems and one-stop engineering service solutions. Its products have been deeply applied in the world's leading integrated circuit enterprises, such as Taiwan Semiconductor Manufacturing Co Ltd, Samsung Electronics, SK Hynix, Micron Technology Inc, United Microelectronics Corp, Semiconductor Manufacturing International Corporation and so on. From 2018 to 2022, the company's revenue continued to grow rapidly, from 52 million yuan to 279 million yuan, of which EDA tools and one-stop engineering service solutions accounted for about 70% of the revenue in 2022. At the same time, the company has continued to lay out the upper and lower reaches of the industrial chain in recent years, carried out a number of industrial mergers and acquisitions and investment, and further improved the ecological layout of EDA.

EDA: integrated circuit crown pearl, overseas three giants monopolize the market, domestic manufacturers under the policy incentives to usher in a golden period of development. With the rapid expansion of the scale of integrated circuits and the rapid iteration of semiconductor industry technology, as the upstream link of the integrated circuit industry, the importance of EDA and the strong leverage effect in the industry has been generally recognized. The global EDA market is about 10 billion US dollars. At present, it is monopolized by Synopsys, Cadence and Siemens EDA. The industry is highly concentrated. In 2020, the global market share of the three EDA giants is more than 77%. China's EDA industry started in the 1980s, but the intermediate development was stagnant for a time, and a number of EDA companies appeared in China around 2008. Since 2015, the country has made great efforts to promote the development of semiconductor and integrated circuit industry, while superimposing the influence of geopolitical factors such as scientific and technological warfare, the EDA industry has ushered in a new golden period under the tide of domestic substitution.

The advantage of clamping position in the key link is obvious, and the concept of DTCO drives the whole process layout of EDA. Based on the concept of DTCO, combined with the characteristics of China's integrated circuit industry, the company has achieved key breakthroughs in device modeling, circuit simulation and verification in the two key links of design and manufacturing, and has achieved certain market advantages in the world's leading integrated circuit enterprises. Among them, the company's device modeling and verification tools have formed a relatively stable market position worldwide with the accumulation of 30 years of technology, and have been widely used by the world's leading fab factories. Under the situation that the company's circuit simulation and verification EDA tools are highly monopolized in the market, it has also achieved a strong competitive advantage in the global memory chip field, partly replacing the world's leading companies, and has been widely used by leading memory chip manufacturers at home and abroad, such as Samsung, Meguiar, SK Hynix, Changxin, etc. Based on the existing advantage tools, the company continues to expand to other links, and launched the whole process simulation design platform NanoDesigner in 2022, realizing the breakthrough of EDA design platform solution. At the same time, in addition to software tools, the company gives full play to the synergy brought by semiconductor device characteristic testing system and one-stop engineering service solution to continuously improve the accuracy and efficiency of EDA products, thus forming a positive cycle of the product system.

Discrimination of future development: adhere to the orientation of globalization, grasp the new development opportunities in the post-Moore era, and accelerate the fuze to create a domestic EDA ecosystem with the help of capital. 1) overseas revenue still accounts for an important part of the company, and overseas mastery of the most cutting-edge semiconductor technology and technology, the company will adhere to its own global positioning strategy to expand overseas business and revenue at the same time, always maintain the tracking of the cutting-edge semiconductor production and design processes, so as to ensure the advanced nature of its own products and technology; 2) the post-Moore semiconductor industry derives many new development directions and puts forward more requirements for EDA tools. It is expected to provide the opportunity of subdivision leading direction for enterprises like the company with the advantage of backwardness; 3) the company will make full use of the power of the capital market, continue to invest in the EDA industry in various forms, and combine production, learning, research and other forces to create a domestic EDA ecosystem to help improve the development and operation efficiency of the domestic EDA market.

Profit forecast and investment advice: we expect the company's operating income from 2023 to 2025 to be 3.85max 5.36 / 723 million yuan, respectively, and the return net profit to the parent is-0.29qp 0.02max, respectively, and the corresponding PS is 723 million times that of 28-20-15. In the short term, the company is expected to benefit from the semiconductor and integrated circuit industry cycle bottoming out and achieve industrial boom resonance; in the long run, the company is a rare domestic EDA enterprise with international competitiveness, highlighting the advantages of key nodes, and jointly building a domestic EDA ecosystem based on DTCO methodology. Based on the above, we give the company a "buy" rating for the first time.

Risk tips: the risk of the loss of technical personnel and the rising cost of technical personnel; the risk that product research and development and technology upgrading are not as expected; the competitive risk caused by the relatively limited size and high concentration of the EDA market; the risk caused by obstacles in the development of investment mergers and acquisitions or poor business coordination; the risk of international trade friction; and the risk that the public materials used in the research report may lag behind or not be updated in a timely manner. Industry scale measurement deviation risk and so on.