Revenue growth rate or inflection point upward, maintaining a “buy” rating

Guilun Electronics released a quarterly report. In Q1 of 2024, it achieved revenue of 82 million yuan (yoy +27.97%, qoq -23.46%), net profit to mother of 36.4717 million yuan (same period last year - 493,800 yuan), and deducted non-net profit of 15.3741 million yuan (same period last year - 713,300 yuan). The rapid increase in revenue was mainly due to the rapid growth of the EDA licensing tool business. The decline in profits was mainly due to share payment expenses, and the growth rate of R&D investment was high. Net profit attributable to mother excluding share payments - RMB 134.381 million. The company's 2024-2026 EPS is expected to be -0.10, -0.07, and 0.04 yuan respectively. Comparatively, the company Wind agreed to expect an average PS value of 20.6 times. Considering that the company has global competitiveness in terms of international customers, the company was given 23.0 times PS in 24 years, with a target price of 21.96 yuan to maintain a “purchase.”

Domestic revenue & EDA design software revenue soared

24Q1's revenue from domestic revenue was 56 million yuan, up 45.7% from domestic revenue, accounting for 68.4%, EDA software licensing revenue of 70 million yuan, an increase of 61.4%. Among them, EDA revenue for integrated circuit design was 45 million yuan, an increase of 120.6%, and EDA revenue for integrated circuit manufacturing was 0.24 billion yuan, an increase of 7.3%. The increase in design EDA became an important driving force for EDA software licensing business revenue. Due to factors such as delays in delivery and acceptance cycles, semiconductor device characteristic testing system business revenue was 7.81 million yuan, and technology development solutions business revenue was 4.12 million yuan. We believe that the company actively grasps domestic market development opportunities, promotes product line expansion, and continuously strengthens products around process and design collaborative optimization in the field of EDA software, providing a strong impetus for EDA software revenue growth.

Investment in R&D increased, and the market competitiveness of new products released may continue to enhance 24Q1's overall gross margin of 94.28%, a year-on-year change of +4.05 pct, or related to changes in revenue structure.

The 24Q1 sales/management/ R&D expense ratio was 27.93%/17.35%/77.12%, +3.62 pct/-1.49pct/+10.47pct. 24Q1 invested 66 million yuan in R&D, an increase of 55.22%, and R&D investment accounted for 80.8% of revenue, +14.2pct. R&D investment continued to increase, and products were continuously iteratively updated. 24Q1 released the latest fully automatic semiconductor parameter testing solution to achieve software and hardware collaboration between electrical characteristics testing systems and EDA products, covering fields such as testing the electrical characteristics of semiconductor devices. Based on EDA core technology, the company creates a one-stop solution. As product solutions are continuously iterated and refined, market competitiveness may continue to increase.

Focusing on DTCO methodology, the full EDA layout continues to be improved

The company focuses on breaking through key EDA technologies in design and manufacturing around DTCO methodologies to create application-driven EDA processes. As the company continues to increase investment in R&D, product maturity has further improved. Furthermore, the company has extended the EDA tool chain through mergers and acquisitions, and the full EDA layout has been further improved, which is expected to benefit from improved product capabilities and brand influence in the long term.

Risk warning: R&D results fall short of expectations; market competition intensifies.