Key investment points: Deeply cultivate emerging application markets, enter high-threshold fields of white electronics, servers, automobiles, and robots, chip+motor+algorithm, a trifecta of platform-based chip design enterprises
Incident: In the first half of 2024, the company achieved operating income of 0.282 billion yuan (YoY +57.78%), net profit due to mother 0.122 billion yuan (YoY +46.68%), and net profit not attributable to mother of 0.104 billion yuan (YoY +94.14%). Looking at a single quarter, 2Q24 achieved revenue of 0.166 billion yuan (YoY +83.92%, QoQ +42.98%); net profit attributable to mother 0.071 billion yuan (YoY +64.88%); net profit not attributable to mother 0.061 billion yuan (YoY +142.26%).
Financial dimension: Gross margin declined slightly in the second quarter of a single quarter, and expenses were properly managed during the period. The 2Q24 company's gross margin was 52.24%, a slight decline from month to month. The company's expense ratio for the first half of 2024 was 19.92%, of which the sales expense ratio was 2.95%, -1.29pct; the financial expense ratio was -4.31%, +0.10pct; the management expense ratio was 4.09%, -1.99pct; the R&D cost rate was 14.24%, -3.86pct; the total R&D investment in the first half of 2024 was 40.1943 million yuan, an increase of 24.11% over the previous year. We believe that the sharp increase in R&D expenses was mainly due to the company's industrial control and vehicle regulations Investment in R&D continues to increase in the field of chip-level chips.
Business dimension: Deeply cultivate emerging application markets and enter high-threshold fields of white electricity, servers, automobiles, and robots. The company's product application fields are smart small household appliances, white goods, cooling fans, electric tools, sports mobility, industry and automobiles, etc. The company continues to deepen emerging application markets while consolidating existing application fields. Small smart appliances, power tools, sports mobility and other fields achieved a sales share of 63.33%; emerging application areas such as white goods, industry, and automobiles continued to grow by 86.27% year on year.
Competitive advantage: chip+motor+algorithm, a tri-omnipotent platform-based chip design enterprise. Product features:
It has a dedicated IP core for motor control with completely independent intellectual property rights, hardware-based control chip algorithms, highly integrated chip design, and cost-effective motor drive control solutions. Technical advantages: Based on years of technology accumulation in chip technology, motor drive architecture technology and motor technology, the company has the ability to provide downstream customers with system-level services such as overall motor solution design, motor system optimization, and solution of terminal product technical problems. Management background: The company's management has a rich industrial background, and the core technical team is mature and stable.
Profit forecast and valuation suggestions: Based on the semi-annual report results, we raised the forecast for the company's 2024E-2026E revenue of 0.56 billion yuan, 0.713 billion yuan, and 0.876 billion yuan, respectively; EPS was 2.47, 2.95, and 3.47 billion yuan, respectively. Considering 1) Focus: The company mainly focuses on special chips for motor drive control; 2) circuit: the company is widely used downstream, entering the market from the segment of motor drive control, and the company's chip products have achieved the same or even better results in various aspects such as technical parameters and control performance; 3) Growth: The company's revenue and net profit have grown rapidly in recent years, which is expected to usher in accelerated growth in the next three years; 4) Profitability: The company has strong independent pricing power and an independent IP core indirectly raises the company's gross margin level. Therefore, we believe that the company's PE valuation level should be higher than that of comparable companies, so the company is given PE (2024E) 48x-50x, and the corresponding reasonable value range is 118.56 yuan to 123.50 yuan.
Risk warning: risk that business performance will not continue to grow rapidly; risk of downstream BLDC motor demand falling short of expectations; risk of supplier concentration; risk of customer concentration; risk of R&D risk; intellectual property risk; risk of core technology leakage; risk of fluctuating sales price or gross margin; risk of falling inventory prices.