Established in 2012, Zhuo Shengwei focuses on research, development and sales in the field of RF integrated circuits. It mainly provides the market with RF front-end discrete devices and various module products such as RF switches, RF low noise amplifiers, RF filters, and RF power amplifiers. The company insists on independent research and development of core technology. With the development of 5G communication technology, it has become one of the few domestic RF device providers that target leading international companies. Its product segment is already at the cutting edge of the industry and has established a good market position in the country.
Demand side: 5G penetration rate has increased, and the discrete device and module markets are growing at the same time. First, with the rapid development of global informatization, networking, and intelligence, and the continuous expansion of downstream application fields, import substitution of integrated circuits is urgent, and domestic demand continues to be strong, especially in the field of analog integrated circuits. Second, demand for RF front-end products targets the three major fields of mobile communications, communication base stations, and the Internet of Things. The 5G wave has brought about a continuous increase in the value of RF front-end chips in smartphones, and the general trend of the Internet of Everything is further driving strong demand in the smart hardware market. Finally, the rapid development of communication technology will drive the continued expansion of the RF chip and module market.
Supply side: Overseas leaders are strong, and domestic enterprises are ready to go. Leading overseas companies started early, and the top five manufacturers had a market share of over 80%, highlighting the core competitive position; the domestic RF front-end industry started relatively late, and there is still a big gap between technical level and experience reserves with developed foreign countries. At present, the domestic RF front-end industry is ushering in new development opportunities, and many emerging RF front-end companies have emerged.
Growth logic: Xinzhuo's production line builds core barriers, and the PAMid module opens up a new growth curve. The company's product structure continues to be optimized, and the proportion of RF modules is gradually increasing; the company has switched from Fabless to the Fab-Lite business model, and Xinzuo Semiconductor's industrialization will promote the construction of advanced domestic “intelligent manufacturing” production lines; in the face of political and economic challenges and fierce competition in the industry, the “pearl” product L-PAMID, which will be released in the future, will add bricks and tiles to the company's high-value and differentiated development path.
Investment advice: Maintain a “buy” rating. I am optimistic about the unique advantages of the supply chain brought by the company Xinzhuo's independent production line, and the potential growth brought about by the release of L-pamid products. The company's revenue for 2023-2025 is estimated to be 43.94 billion yuan 53.09/6.326 billion yuan, and net profit attributable to the parent company is 11.57/14.36/1,698 billion yuan, respectively, and the corresponding PE is 40.33/32.51/27.49 times, respectively.
Risk warning: The competitive landscape of the industry is intensifying, R&D investment is large, and the recovery in downstream demand falls short of expectations