occurrences

On May 28, according to the company's official WeChat account, recently, the company announced the official launch of ESDITM, a chip-level HBM electrostatic protection analysis platform, and PTM, a power device and power chip design analysis and verification tool, and began to be widely promoted in domestic and foreign markets.

Key points of investment

Software and hardware and development solutions interact efficiently to enhance customer stickiness. The company's main products and services include manufacturing EDA, design EDA, semiconductor device characteristic testing systems and technology development solutions. In 2023, the company's integrated circuit design EDA/integrated circuit manufacturing EDA/semiconductor characteristic test system/technology development solutions achieved revenue of 1.02/1.00/0.82/0.43 billion yuan respectively, +31.16%/-4.11%/+33.78%/+30.15%, respectively. A breakthrough in the high-end semiconductor testing instrument market is one of the keys for the company to use data-driven EDA processes to create innovative DTCO solutions: data collected by semiconductor device characteristic testing systems is the data source required for device modeling and verification of EDA tools, and the two have a strong synergy effect. Through the linkage between semiconductor device characteristic testing systems and EDA tools, it is possible to create data-driven EDA solutions, closely integrate and form a business chain to help fabricator customers optimize device design and manufacturing processes for targeted process platforms. Technology development solutions, in combination with the company's other products, can form more complete solutions with higher added value. While delivering technology development projects to customers, they can also create and verify application-driven EDA processes, which can also promote more efficient use of the company's other products and increase customer stickiness.

In 2021/2022/2023, the number of the company's customers was 112/126/149, and the average revenue contributed by a single customer was 171.58/219.87/2.194 million yuan, respectively. The contribution of a single customer continued to increase over the years.

With core EDA products as an anchor, high R&D investment consolidates technological leadership. In '23, the company invested a total of 237 million yuan in R&D, +69.45% year-on-year. R&D investment accounted for 72.05% of revenue, an increase of 21.84 pcts over the previous year. Continued high investment in R&D continuously consolidates the company's technological leadership, strongly promotes talent team building and supports research and development of new products. In terms of technology leadership, 1) The company's manufacturing EDA tools can support advanced process nodes such as 7nm/5nm/3nm and various semiconductor process routes such as FinFET and FD-SOI. These tools have long been used by the world's leading fabs on various process platforms and occupy an important position in their relevant standard manufacturing processes. 2) The company's design EDA tools can support advanced process nodes such as 7nm/5nm/3nm and various semiconductor process routes such as FinFET and FD-SOI, and perform transistor-level high-precision and fast circuit simulations on various integrated circuits such as digital, analog, and memory, and have been used on a large scale by leading international semiconductor manufacturers. In terms of product development, in 2023, focusing on DTCO methodologies, the company continued to expand industry-leading DesignEnablement (design implementation) EDA comprehensive solutions based on core EDA technology for key aspects of integrated circuit manufacturing and design, such as device modeling, circuit simulation verification, and standard unit libraries, to accelerate the construction of industry-leading integrated circuit simulation and verification solutions, and further polish the EDA full-process platform product NanoDesigner? It also promoted the implementation of the entire EDA process driven by applications such as memory EDA. In the fields of foundry, high-end memory, and SoC design and manufacturing, it has received large-scale mass production applications from many leading global companies in advanced process development and high-end chip design, and its technical strength and market position have improved markedly.

M&A integration extends the EDA tool chain and lays the foundation for implementing full-process solutions.

In terms of merger and acquisition integration experience, the company completed the acquisition and successful integration of Boda Wei, Entasys, and Magwel before listing, providing a model for the company to continue to carry out mergers and acquisitions; since listing, the company has also invested in several companies such as Banxin Technology, Zhengxinyuan Technology, Shandong Qixin, Xinyu Software, Dongfang Jingyuan, Hongzhiwei, Fanli Technology, and Shanghai Silchip, and will carry out a continuous strategic layout in terms of investment incubation, merger and acquisition integration, etc., covering the scope of integrated digital EDA, logic simulation, etc., layout Full EDA layout for digital circuit design such as wiring, OPC, TCAD, ESD, electromagnetic field simulation, analog circuit design, wafer manufacturing, etc. In May 2023, the company successfully acquired 100% of the shares of Fuzhou Xinzhilian Technology Co., Ltd., and Xinzhilian's existing technology and products can expand the company's leading position in chip-level EDA design and verification to board-level and package-level design, which not only fills the gaps in board-level and package-level design of the company's products, but can also be combined with the company's existing advanced design and verification technology. In August 2023, the company completed 100% of the shares in the Belgian EDA company Magwel. Recently, Magwel's two chip-level HBM electrostatic protection analysis platform esdiTM and power device and power chip design analysis and verification tool PTM? It was officially released for the first time in the domestic market, helping the company expand upstream and downstream customers of power semiconductors and automotive electronics.

Investment advice

We expect the company to achieve revenue of 4.12/5.16/647 million yuan in 2024/2025/2026, and realized net profit of -0.54/-0.42/0 billion yuan respectively. The current stock price corresponding to 2024-2026 PS is 16 times, 13 times, and 10 times, respectively. For the first time, coverage is given, giving it a “buy” rating.

Risk warning

Risk of the company continuing to lose money over a period of time due to increased share payments and R&D expenses; risk of technology upgrade iteration; risk of R&D results not meeting expectations or R&D investment exceeding expectations; risk of losing R&D technicians and rising personnel costs; risk of loss of R&D technicians and rising personnel costs; risk of market competition; risk of impairment of goodwill; risk of foreign market risk; risk of international trade friction; risk of exchange rate fluctuations; risk related to tax incentives; risk of intellectual property infringement.