Key points of investment:
Company Overview: World-renowned AI chip star, becoming a leader in the domestic industry
Cambrian is one of the most representative smart chip manufacturers in China. Since its establishment, the company has focused on the development and technological innovation of artificial intelligence chip products, and is committed to building core processor chips in the field of artificial intelligence, so that machines can better understand and serve humans. The company's main business is the R&D, design and sale of artificial intelligence core chips used in various cloud servers, edge computing devices, and terminal devices, as well as providing customers with rich chip products. Currently, the company's main product lines include cloud product lines, edge product lines, IP licensing, and software.
Industry pattern: AI applications are trending, and GPU demand is rapidly advancing. Currently, applications such as AIGC, high-end servers, high-performance computing, and 5G are developing rapidly. These applications are inseparable from the underlying support of high-process computing power chips. Global GPUs present a competitive pattern of “one super one”. According to IDC data, Nvidia accounted for 91.4% of the enterprise-grade GPU market in 2021, and AMD accounted for 8.5%. Currently, China's accelerated computing server market demand is mainly handled by GPUs. However, AI smart chips have a higher degree of customization, and are expected to become mainstream in the market in the future with more flexible architecture design and higher computing power.
Company: Cloud chip performance continues to improve. For high-quality customer groups, the company has developed three types of chip products for the three major scenarios: terminal intelligent processor IP, cloud smart chip and accelerator card, edge smart chip and accelerator card, and has developed a unified basic system software platform (including application development platforms) for all products in the above three product lines. Since its establishment, the company has independently developed three generation intelligent processor microarchitectures (MLUarch00, mLUARCH01, and MLUarch02), and is one of the enterprises with the deepest accumulation in this technology direction at home and abroad. Based on the self-developed processor architecture, the company's cloud chip performance continues to improve. On the customer side, the company's first customer in '23 accounted for 65.88% of the company's total annual sales. This revenue is the company's intelligent computing cluster system business revenue. Such business projects are generally large, so there is a situation where individual customers account for a relatively large share of sales. The company's customers are of high quality and good continuity, which is expected to support the company's development.
Profit forecasting and investment advice
AI computing power is a top priority for domestic replacement, and there is broad scope for future development. As a domestic AI chip leader, the company is expected to continue to benefit from the gradual construction of product advantages and the trend of booming AI development. Furthermore, the domestic policy side continues to provide policy support, and the company is expected to receive more orders in domestic intelligent computing construction to support the company's rapid growth. We believe that the company, as a scarce target for domestic AI chips, is expected to benefit from the booming development of the AI industry and the dual logic of replacing domestic computing power, so it can enjoy a certain valuation premium. We expect the company to achieve revenue of 12.99/20.17/3.06 billion yuan in 2024-2026, corresponding to the current PS valuation of 63/40/25 times. First coverage, giving a “buy” rating.
Risk warning
Risk of AI demand falling short of expectations, risk of high customer concentration, and risk associated with supply chain stability.