Covered for the first time, giving a rating for increasing holdings. The company's EPS is expected to be 0.13/0.18/0.23 yuan respectively in 2023-2025. The target price was 31.82 yuan, corresponding to 34 times PS in 2024.

Based on differentiated competitiveness in segmented fields, the company is expected to break the highly concentrated domestic market pattern, and the market scale will expand beyond expectations. The market believes that the company cannot provide a complete full-process solution like the three major international giants, and the space for business development is blocked. We believe that for EDA companies, the degree of perfection of product categories or the ability to achieve differentiated competition on point tools is an important indicator of enterprise competitiveness. The company focuses on EDA process innovation and has formed a core tool through targeted breakthroughs in key links. As the localization process accelerates, the company is expected to break the concentrated domestic market pattern, and the scale of business will exceed expectations.

The company's EDA tools are technologically leading in the international market, forming a solid barrier. The company has mastered EDA core technology with international market competitiveness and control in the two key aspects of integrated circuit manufacturing and design, device modeling and circuit simulation. Its core key tools can support advanced process nodes such as 7nm/5nm/3nm and various semiconductor processes such as FinFET, build high technical barriers, and continue to serve more than 100 world-leading integrated circuit companies, including TSMC, Samsung, and SMIC. At the same time, Intel owns 3.84% of the company's shares, which is expected to provide the company's business development in the EDA field Synergistic advantages.

As a leader in domestic EDA, it is expected to continue to benefit from the domestic substitution process. The rapid development of the domestic integrated circuit industry has provided huge opportunities for the company's business. The company is also gradually improving product coverage through a combination of endogenous growth and epitaxial mergers and acquisitions. The future market space is huge.

Risk warning: technological breakthroughs fall short of expectations, industry competition intensifies, domestic substitution falls short of expectations