Demand for downstream smartphones is expected to improve steadily, and there is plenty of room for domestic replacement of power management chips.
Smartphones are one of the important application areas of power management chips. According to IDC reports, global and Chinese smartphone shipments increased 7.58%/8.98% year-on-year respectively in 24Q2, and smartphone sales in China also achieved +7.4% year-on-year in 2024 618. We anticipate that in the future, stimulated by factors such as AI and the popularity of folding screens, mobile phone sales are expected to rise steadily, which is expected to drive the recovery of the power management chip market. In terms of the competitive landscape, foreign companies such as TI, ADI, and Infineon account for more than 80% of the global power management chip market, and there is plenty of room for domestic replacement of this product.
The company has outstanding product-side and client-side advantages, and continues to expand emerging application fields. On the product side, the company has focused on the development of power management chips for 20 years. Some star products, such as LDO, OVP, and TVS, have reached or surpassed international and domestic bidding products, and have established a good reputation among clients due to their extremely low failure rate; at the same time, the company actively promotes products such as intelligent networking delay management units and signal chains. Client, the company adheres to the big customer strategy, cooperates with Samsung Electronics since 2010, and continues to expand new product numbers and terminal application fields in its supply chain system; in addition to Samsung, the company also has high-quality customers such as LG, Xiaomi, and Haier. We believe that with star products and years of experience with major customers, the company is expected to fully benefit from the recovery in downstream demand.
It continues to expand high-end application fields such as industry and vehicle regulations, and is expected to contribute to additional performance in the future. In the field of automotive electronics, the company's various products have served well-known customers such as Samsung, Haman, BYD, and Hyundai. At the same time, the company has focused on strengthening research and development of high-current and low-power DC/DC products, and is expected to continue to expand applications in communication base stations and industrial electronics in the future.
Under policy catalysis, the company's detonator business is expected to accelerate growth. The Ministry of Industry and Information Technology has clarified the timeline for full use of digital electronic detonators in 2022: stop production by the end of June 2022, and stop selling industrial detonators other than industrial digital electronic detonators by the end of August. Meanwhile, Lixin Micro intelligent networking delay management unit products are mainly used for digital electronic detonators. The company has been deeply involved in this industry for nearly 20 years. Currently, it has set up a holding subsidiary, SEMIKEN to promote the electronic detonator project. Domestic and overseas demand has blossomed. It has completed many domestic engineering projects (for example, Luming Molybdenum Mine in Yichun, Heilongjiang), and its products are exported to overseas markets such as South America, Africa, and Australia.
Investment advice
The first coverage gives a “buy” rating. We expect the company's net profit to be 0.279/0.328/0.373 billion yuan in 2024-2026, up 39.23%/17.61%/13.74% year-on-year, corresponding EPS 2.09/2.46/2.79 yuan, and PE 19/16/14.
Risk warning
Market competition risks, terminal demand recovery falls short of expectations, and R&D progress falls short of expectations.