The company is a pioneer in global smart chips, and will usher in multiple growth drivers such as rapid development of the large model industry, localization of AI chips, and iteration of the company's new products.
Company Overview: A cloud-edge integrated smart chip manufacturer. Equity incentives highlight growth confidence. The company is a world-renowned emerging company in the field of smart chips. It can provide a series of smart chip products and platform-based system software integrating cloud side, software and hardware collaboration, training and reasoning integration. In 2023, the company's revenue was 709 million yuan, of which the intelligent computing cluster revenue was 605 million yuan, +31.85% year-on-year. It mainly participated in the construction of computing power infrastructure in Taizhou and Shenyang. In 2023, the company formulated an equity incentive plan. The target values are 2024 revenue of at least 1.1 billion yuan, 2024-2025 cumulative revenue of at least 2.6 billion yuan, and 2024-2026 cumulative revenue of at least 4.6 billion yuan, demonstrating the company's medium- to long-term growth confidence.
AI chip industry: large models at home and abroad continue to develop, and the localization process of AI chips accelerates 1) Demand side: Iteration of large models at home and abroad, increasing investment in CSP and operators. In May 2024, OpenAI officially announced the GPT-4O multi-modal large model. Under the same hardware conditions, GPT-4O inference speed is twice that of GPT-4 Turbo; the input price of OpenAI GPT-4O is about 0.035 yuan/thousand tokens, and the output is about 0.1 yuan/thousand tokens. Lower the price of large models, or accelerate the development of AI applications by large model manufacturers. Demand for CSPs and operators is high: In 2024, Microsoft, Google, AWS, and Meta are expected to account for 20%, 17%, 16%, and 11% of global procurement volume, respectively; in 2024, China Mobile will launch a procurement tender for 7,994 AI servers.
2) Supply side: Global AI chip shipments have increased, and the localization process has accelerated. In 2024, the global AI chip market is expected to be US$67.1 billion, +26% year over year. In 2023, China's accelerator chip market reached nearly 1.4 million, accounting for 67% of inference chips; local Chinese brands shipped more than 200,000 chips, accounting for 14%.
Company products: Cloud chips are the core of intelligent computing, edge+end side rich product matrix1) Cloud: As the source of core intelligent computing capabilities, chips include Siyuan 290, Siyuan 370, etc. In September 2022, the company said that Siyuan 590 chips are being developed and released; the company is also vertically expanding the category to training machines (Xuansi 1000 and 1001) and intelligent computing systems.
2) Edge side: Mainly Siyuan 220 chips, with a total of one million units shipped by the end of 2023; after mass production of edge chips in 2020, they cooperated with leading customer A in the industry, and the main revenue came from Company A.
3) IP licensing and software: IP licensing grants customers intellectual property such as intelligent processor IP developed by the company. The company also provides unified platform-level basic system software Cambricon Neuware for a full range of cloud-side smart chips and processor products.
Profit forecast and investment rating: From 2024 to 2026, we expect the company to achieve revenue of 1,400/24.93/3.484 billion yuan, net profit to mother of 4.41/0.18/250 million yuan, EPS of -1.06/0.04/0.60 yuan, and corresponding PS of 53.59/30.10/21.53X, covered for the first time, giving it an “gain” rating.
Risk warning: The macroeconomy affects downstream demand, the development of the large model industry falls short of expectations, market competition intensifies, the game between China and the US intensifies, the company's performance falls short of expectations, and the company's new product development falls short of expectations.