Investment highlights
For the first time, it covered Nanxin Technology (688484) to give it a rating that outperforms the industry. The target price is 35.20 yuan. Based on the P/E valuation method, it corresponds to 43 times the price-earnings ratio in 2024. The reasons are as follows:
Leading domestic charging chip, global leader in charge pump products. The company focuses on the field of power supply and battery management. The product layout covers AC end to battery end, and is a leading domestic charging chip company. The company's charge pump products have outstanding advantages. According to Frost & Sullivan data, the company's charge pump shipments in 2021 ranked first in the world. Compared with other domestic and foreign companies in the same industry, the company has a rich charge pump architecture, including 2:1, 4:2, 4:1, 6:2, etc. With leading technical advantages, the company's products have been introduced to leading customers such as Honor, Xiaomi, OPPO, and Vivo.
The product layout is comprehensive, making it a scarce supplier that can provide end-to-end solutions. The company has a comprehensive layout around power supply and battery management chips, and is a domestic company with scarce products that can cover the power supply end to the device end. We believe that in order to reduce operating and procurement costs and shorten the product development cycle, brand manufacturers prefer manufacturers that can provide overall solutions. The company is expected to use charge pumps as the core and obtain product value increases by providing complete fast charging solutions.
Implementing a platform-based strategy and focusing on developing the automotive market is expected to contribute to long-term growth momentum. The company is developing the industrial and automotive markets horizontally based on the consumer sector. According to the company's official website, the company has launched a variety of vehicle-grade charging solutions, covering various application fields such as vehicle charging, vehicle lighting, body control, infotainment systems, and ADAS. At the same time, according to the company's prospectus, the company raised 335 million yuan to be used for vehicle chip research and development. We believe that the company already has a deep technological accumulation in the high-end consumer sector. The company's accumulation in the consumer sector is expected to help it enter the automotive sector, while high-threshold, high-boom automotive-grade chips are also expected to grow rapidly and become the company's second growth curve.
What is our biggest difference from the market? We are more optimistic about the growth of the company's charge pump chips and expansion in fields such as automotive electronics.
Potential catalysts: The recovery of consumer electronics exceeded expectations, and the penetration rate of high-power fast charging exceeded expectations.
Profit forecasting and valuation
We expect the company's 2023/2024/2025 EPS to be 0.62/0.82/1.18 yuan, respectively, and a CAGR of 27% (2021-2025E). The current stock price of the company corresponds to 39 times P/E in 2024. We obtained the company's target price of 35.20 yuan based on 43 times P/E in 2024. The target price has room for 10.0% increase compared to the current stock price, which for the first time covered the “outperforming industry” rating.
risks
Research and development, certification and promotion of new products fell short of expectations; loss of key technical talents; slow talent training; high concentration of customers and suppliers; high concentration of customers and suppliers; industry prosperity fell short of expectations; increased international trade friction; increased market competition; and liquidity risks after the ban was lifted.