Shengbang Co., Ltd.: Domestic simulation leader

After more than ten years of deep market cultivation and product accumulation, Shengbang Co., Ltd. has now developed into a leading domestic analog chip with product performance comparable to first-class overseas companies; on the endogenous side, the company continues to carry out R&D work to achieve continuous improvement in product richness; on the epitaxial side, the company has continued to carry out a series of acquisition plans since listing to continuously supplement the company's product categories; thus achieving full coverage of many downstream industries, automobiles, consumption, communications, medical care, etc.

The company has been adhering to the “power management” + “signal chain” two-wheel drive business strategy for a long time, and the product revenue structure has remained open at 7:3; as far as fundamentals are concerned, the company has now returned to the growth channel after experiencing the effects of weak terminal demand and industry warehousing; in the first half of 2024, it achieved operating income of 1.576 billion yuan, +37.27% year over year, and achieved net profit of 0.179 billion yuan, +99.31% year over year, and the gross margin center returned to around 50%.

Analog chips: Changpo Fuyuki's growth track, opportunities and challenges coexist, relied on experience+ there are many product categories. Analog chips are an industry with heavy snow in Changpo. There are a wide range of downstream applications of analog chips, and the industry is less affected by fluctuations in downstream demand alone. Therefore, compared with cyclical characteristics, the growth characteristics of the analog industry are more prominent; the global analog chip industry is expected to reach 84.3 billion US dollars in 2025, +7% year over year. As far as the competitive landscape is concerned, the competitive pattern of the simulation industry is scattered, but leaders often rely on R&D mergers and acquisitions and horizontal and vertical integration development strategies to achieve continuous revenue growth.

Opportunities and challenges coexist in the domestic simulation industry. For domestic analog chip companies, the industry's opportunity is that the current level of localization of analog chips is still low, and there is plenty of room for growth. At the same time, along with the continued growth of domestic analog chip companies, internal developments in the middle- and low-end markets are also occurring one after another. At a time when development and competition are at the same time, we believe that product strength+merger and acquisition integration capabilities will be the decisive point for the company to achieve continuous growth.

Shengbang shares: outstanding competitiveness and continuous growth

Shengbang shares are highly competitive. Comparing the average gross margin and net interest rate (overall law) of an A-share simulation company with the profit margin level of Shengbang shares, it can be found that as the leading domestic analog chip company, the gross profit margin and net interest rate levels of Shengbang shares are far higher than the average of the industry, mainly due to the continuous improvement of the company's overall competitiveness brought about by “endogenous extension and product catalogue development.”

The core advantages of Shengbang Co., Ltd. are: 1. Based on research and development, the product catalog development is clear. Rich product categories are the core competitiveness of simulation companies. Therefore, simulation manufacturers attach great importance to R&D investment; Shengbang Co., Ltd. has long adhered to a high R&D investment strategy to build a core growth driver. 2. Horizontal and vertical integration to continue to make up for development shortcomings. On a horizontal level, Shengbang shares have continued to supplement product categories through several mergers and acquisitions since its listing. Successful mergers and acquisitions in the past are a strong reflection of Shengbang's ability to integrate. The vertical layout testing process improves the reliability and stability of the product when shortening the time cycle from “R&D” to “marketing”.

The company's net profit for 2024-2026 is estimated to be 0.425, 0.628, and 0.894 billion yuan, respectively, +52%, +52% year-on-year; maintaining a “buy” rating.

Risk warning

1. Competition in the analog chip industry intensifies risks;

2. The speed of new product development and customer introduction fell short of expectations;

3. Downstream demand recovery falls short of expectations;

4. The profit forecast assumption is unfounded or falls short of the expected risk.