Key points of investment:
The leading position in the RF switching business in China is stable, the low-noise amplifier business is mature, and the expansion of market scale is driving the company's rapid development. 1) In the context of the rapid expansion of the global RF market, discrete devices will still occupy a place. According to QYResearch data, the global RF market is expected to reach US$31.310 billion in 2023, an increase of 15.02% over the previous year; according to Yole data, the global RF discrete devices are expected to account for 30.93% of the RF front-end market share in 2023. 2) The company is a leading domestic RF switch company. In 2020, the company's RF switch business accounted for 5% of the world, ranking fifth, and its business maturity is comparable to that of major international manufacturers. 3) The company's low noise amplifier business achieves full product process coverage and supports all 5G sub-6GHz frequency ranges. With its leading position in switches and the comprehensive layout of LNA, the company is expected to take advantage of market expansion.
Business areas such as filters and power amplifiers continue to gain strength, and companies are expected to be the first to benefit from the wave of domestic substitution. 1) Filters account for 53% of RF front-end value. According to Yole data, the filter market is expected to continue to expand at a compound annual growth rate of 5% in the future. Overseas leaders had a market share of more than 95% in piezoelectric filters in 2020, and there is plenty of room for domestic replacement. The company currently builds its own filter production line, and is working both in the SAW and IPD filter fields. Its own brand MAX-SAW has excellent performance, and the technology path is compared to major overseas manufacturers. 2) As a discrete device that accounts for 33% of value and ranks second, power amplifiers have a CR3 of 92% in 2019. The company actively lays out the power amplifier business based on mainstream GaAs processes in the market.
The communication system upgrade has led to an increase in the degree of RF front-end modularity. The company's Xinzhuo production line has built core autonomous and controllable capabilities, and the business layout has been steadily broadened from the receiver end to the transmitter module. 1) The main downstream application area of RF front-end is mobile terminals. The continuous development of communication formats requires increasing RF front-end integration. According to Yole data, the RF module market accounted for 69.07% in 2023, and the market size reached US$13.465 billion. The share of modules is expected to expand to 72.13% in 2026. 2) The company has adapted to the development of the times and stepped up efforts to lay out the module business. The module revenue share is growing significantly. In 2023, the company's module business share has increased to 36.34%. 3) The company's module business gradually expanded from receiver modules to more technically difficult transmitter modules. Currently, receiver module products include LFEM, LNA BANK, DiFEM, L-diFEM, etc., and the vast majority of integrated self-produced filters are expected to gradually become prominent. In terms of transmitter modules, the company's L-pamif module products with integrated self-produced IPD filters have been mass-produced and shipped. L-pamid, a “pearl” product that needs to be broken through domestically, has achieved a major breakthrough from “0” to “1.” In the future, it is expected that it will rely on autonomous and controllable capabilities to take the lead in opening up domestic replacement space.
First coverage, giving a “buy” rating. It is expected that in the future, the RF front-end market will expand further and the domestic substitution process will accelerate. As a leader in the domestic industry, we are optimistic about the long-term development of the company. We expect the company's revenue in 2024-2026 to be 53.48, 64.88 and 8.189 billion yuan, respectively, with year-on-year growth rates of 22.14%, 21.32% and 26.22% respectively; net profit to mother is 11.77, 13.21 and 15.95 billion yuan respectively, with year-on-year growth rates of 4.88%, 12.19% and 20.78% respectively. First coverage, giving a “buy” rating.
Risk warning: 1) Product customer introduction falls short of expectations; 2) downstream demand falls short of expectations; 3) market competition intensifies.