The company is one of the few enterprises in China that also undertakes major national projects for digital and analog integrated circuits. Among them, digital integrated circuit products include logic chips, memory chips and microcontrollers represented by programmable logic devices (CPLD/FPGA). Analog integrated circuit products include data conversion (ADC/DAC), bus interface and power management, etc., and the products are widely used in special fields such as electronics, communications, control, and measurement.

Relying on the implementation of this fund-raising investment project, the company will continue to increase investment in R&D, focusing on developing products such as high-performance FPGAs, high-speed high-precision ADC/DACs, and intelligent SoCs, to fully localize special integrated circuit products from design to process, and reach the leading level in China. At the same time, we will further enhance the comprehensive capabilities of product testing and verification, and build a leading integrated circuit testing platform in the southwest region.

The company's performance continues to grow at a high level, and its profitability continues to improve. Since 2019, the company's revenue has continued to grow at a high rate, from 142 million to 845 million in 2022, with a compound annual growth rate of 56.19%. At the same time, net profit to mother also experienced significant growth, from $47 million in 2020 to $281 million in 2022, with a compound annual growth rate of 81.50%. Special fields require higher stability and reliability of integrated circuit products. At the same time, products have characteristics such as small batches and multiple varieties, making the product technology difficult and investing a lot in early R&D, so it shows the characteristics of high R&D investment and high gross profit level. The company's in-house business, such as programmable logic devices (CPLD/FPGA) and data conversion (ADC/DAC), has rapidly expanded its revenue scale, driving a significant increase in scale effects and a gradual increase in gross margin. From 2018 to 2022, the company's gross margin increased from 67.72% to 76.13%, and the net sales margin increased from 3.62% to 33.59%, and the company's overall profitability continued to increase.

At the right time for the construction of national defense informatization, the military electronics market reached 100 billion dollars. China's defense science and technology industry mainly covers six major industrial clusters: military electronics, aviation, aerospace, weapons, nuclear industry, and shipping. Among them, military electronics not only exists independently as an industrial cluster, but also serves other industrial clusters such as aviation, aerospace, weapons, ships, etc., providing technical support for the transformation of military aircraft, satellites, ships, and vehicles from mechanization to informatization. Military electronics is a high point in modern weapons and equipment and the entire national defense industry. With the development of national defense informatization construction, the development of military electronics will usher in a golden period. According to estimates by the Forward-looking Industry Research Institute, the market size of China's military electronics industry is expected to reach 501.2 billion yuan in 2025, and the compound annual growth rate will reach 9.33% from 2021 to 2025.

The company's product line covers high, medium and low end products, and sales revenue of high-end products is gradually increasing. From 2020 to 2022, the company's main product revenue sources were programmable logic devices CPLDs and FPGAs, and the total revenue share remained around 40%. For CPLD, the company's HWD14/14XL series products are the mainstream choice with high demand in the market. There are relatively few logic units, and the use of ceramic packaging is more reliable. The HWD570/1270/2210 series of products have more logic units, higher performance and reliability, and relatively high prices. With the company's continuous R&D investment and marketing of new products, their contribution to sales revenue has gradually increased recently. Regarding FPGA products, with the support of the “Eleventh Five-Year Plan” to “13th Five-Year Plan” National Science and Technology Project, the company has successfully developed three series of products, including the 6 million-level 2V series, the 20-million-level 4V series, and the 70 million-level Kiyan series. The number of door levels of this series of products has increased, performance has improved significantly, and high-end products are more expensive.

The core products are autonomous and controllable, and technology research and development is deep. The company has been deeply involved in the field of integrated circuits for more than 20 years, focusing on the research and development of key technologies for special digital and analog integrated circuits, and has formed a series of core technologies with independent intellectual property rights. At the same time, it has many ongoing research projects and multiple technical reserves in key fields such as programmable logic devices, data conversion ADC/DACs, and intelligent SoCs. As of June 30, 2023, the company has 88 domestic invention patents, 4 overseas invention patents, 183 integrated circuit layout design rights, and 28 software copyrights. A series of core technologies with independent intellectual property rights have been formed in logic chips, analog chips, memory chips, microcontrollers, etc. At the same time, independent core technology products are in an absolute mainstream position in revenue.

Raise capital to develop chip R&D and industrialization to build a high-end integrated circuit R&D and industrial base. The company will raise capital to develop and industrialize products in three directions, including high-performance FPGAs, high-speed high-precision ADCs, and adaptive smart SoCs, to consolidate the company's traditional advantages in the FPGA field, continue to promote the company's rapid development in the high-speed high-precision ADC field, and actively promote the company's breakthrough in the field of intelligent SoCs. In addition, the company will invest in the construction of the company's testing center and R&D center to build a high-end integrated circuit industry platform integrating design, testing and application development, and further enhance the company's comprehensive integrated circuit product testing and verification capabilities to meet the company's growing product testing needs and strengthen and consolidate the company's central position in the special integrated circuit field.

Profit forecast: The company's revenue for 2023/2024/2025 is expected to be 930, 11.58, and 1,436 million yuan, respectively, and corresponding net profit to mother of 3.14, 4.05, and 515 million yuan.

Risk warning: Risk of tight supplier production capacity and fluctuation in procurement prices, risk of fluctuations in downstream demand and product sales prices, risk of accounts receivable and bill receivable recovery.