Key points of investment

Next Tuesday (March 26), there will be an inquiry for a new stock “Canxin Shares” on the Science and Technology Innovation Board.

Canxin Co., Ltd. (688691.SH): The company is an integrated circuit design service company that provides one-stop chip customization services. According to service types, it can mainly be divided into full chip customization services and chip engineering customization services. The company achieved revenue of 955 million yuan/1.03 billion yuan/1,341 billion yuan respectively in 2021-2023; YOY was 88.63%/36.44%/2.99%, and the three-year compound annual growth rate of operating income was 38.39%; net profit to mother was 44 million yuan/95 million yuan/172 million yuan, YOY was 147.99%/117.53%/81.23%, and the three-year compound annual growth rate of net profit to mother was 113.83%. According to preliminary estimates by the company's management, the company's net profit attributable to the owner of the parent company in 2024Q1 is estimated to be 58 million yuan to 63 million yuan, an increase of 0.49%-9.15% over the same period last year.

Investment highlights: 1. The company is the fifth largest chip design service provider in the world and the second largest in China, and has established a long-term strategic partnership with SMIC. The company was founded in 2008. Since its establishment, the company has continued to focus on chip design services. Its products cover downstream applications such as the Internet of Things, industrial control, network communication, and high-performance computing, and has now become the fifth largest chip design service provider in the world and the second largest in China. According to the Shanghai Integrated Circuit Industry Association report, the company accounted for 4.9% of the global integrated circuit design service market share in 2021.

Since its inception, the company has established a strategic partnership with SMIC, a leading foundry foundry in mainland China. Currently, the company's design capabilities match SMIC's various process platforms, which can greatly improve the customer flow rate, and cooperation with SMIC can provide customers with better design services. According to the first round of responses to the company's review and inquiry, it has been doing business with SMIC since 2009. In November 2010, SMIC took a stake in Cayman Canchip, and is the second largest shareholder of the company. Currently, SMIC Holdings, a wholly-owned subsidiary of SMIC, holds 18.98% of the company's shares and is the second largest shareholder of the company. ; During the reporting period, SMIC was the company's largest supplier, and the company's procurement ratios for each period were 69.02%, 77.25%, 84.89%, and 75.29%, respectively. 2. The company's R&D efficiency may be relatively high. In comparison, the company's R&D personnel may contribute relatively high. As of June 30, 2023, the total number of R&D and technical personnel in the company was 187. Combined with the company's semi-annual revenue report, the company's annual labor efficiency ratio reached 7.17 million yuan/person. Presumably, the company developed its own IP and industry SoC solutions based on common requirements to form a system-level chip design platform, YouSIP, and paid more attention to the link between design and process in the chip customization business, making related technologies more reusable, which not only helps reduce R&D costs, but may also increase the probability of successful R&D to a certain extent. In 2020-2022, labor accounted for 10.76%, 7.74%, and 13.98% of the company's chip design business costs, respectively. During the reporting period, the company successfully streamed more than 530 videos, with a single-stream film success rate Over 99%, of which the film was successfully streamed more than 140 times at special process nodes such as BCD, EFLASH, HV, SOI, LCOS, and EEPROM.

Comparison of listed companies in the same industry: The company is mainly engaged in integrated circuit design services, and selected VeriSilicon Co., Ltd., an A-share listed company with the same main business as the company, as a comparable company for Canxin Co., Ltd., but due to the small number of comparable companies, we tend to think that its reference value is limited. Looking at the comparable companies mentioned above, the average revenue scale (TTM) of the industry is 2,559 million yuan, the comparable PS-TTM is 8.81X, and the gross sales margin is 43.58%; in comparison, the company's revenue scale and gross sales margin are lower than the industry average.

Risk warning: There is still a possibility that companies that have begun the inquiry process will not be able to go public due to special reasons; company content is mainly based on the content of prospectus and other public information; there is a risk that the selection of listed companies in the same industry is not accurate enough; there may be interpretation deviations in the selection of content data. The specific risks of listed companies are shown in the text.