The company is a scarce high-end MEMS inertial conductor supplier in China, and has strong technical barriers and established a long-term growth logic

Xindong Lianke has been deeply involved in high-end MEMS inertial guidance for decades. The competitive barriers are remarkable, the application side has entered an inflection point in growth, and the company's medium- to long-term growth logic has been established. At the industry level, the importance of domestic high-end MEMS sensors is becoming more and more prominent, and they are of great significance to industrial and military development. The middle and high-end scene has high technical barriers, the competitive pattern in the domestic market is good, and leaders enjoy a high level of bargaining power. Since 2023, the popularity of high-end MEMS application scenarios has continued to increase, injecting growth vitality into the development of the industry. At the company level, Chipcom is one of the few companies that can achieve stable mass production of high-performance MEMS gyroscopes. The technical advantages are remarkable, and the core indicators of the product have reached the international advanced level. The shareholder background is strong. The 214 majority shareholder is the backbone of the national military microelectronics technology and has deep technical strength. We expect net profit for 2024-2026 to be 0.222/0.304/0.439 billion yuan, and the corresponding EPS is 0.56/0.76/1.10 yuan/share, respectively. The current stock price corresponding to 2024-2026 PE is 82.6/60.4/41.9 times, respectively. Based on the company's deep technical barriers, it has sufficient bargaining power compared to upstream and downstream, and the application side has high growth, and the first coverage will be given a “buy” rating.

Starting from the application side, the high-performance MEMS market is expected to maintain rapid growth

On the application side, eVTOL has ushered in an acceleration cycle of commercialization. The scale is expected to grow to 9.5 billion yuan in 2026. The CAGR in 2024-2026 is about 72.3%, while IMU modules account for about 8% of eVTOL costs. IMU is the core of autonomous driving navigation. According to estimates by the Micro-Nano Manufacturing Industry Promotion Association, China's automotive IMU market for autonomous driving will be 3.151 billion yuan in 2023, and will rise to 15.494 billion yuan by 2030, with a CAGR of 25.55%.

Military drones/guided weapons, and humanoid robots all rely on the development of MEMS inertial guidance. In 2023, the domestic high-performance MEMS gyroscope market is about 1.268 billion yuan. The global high-end inertial sensing market is estimated to be about 15% CAGR in 2023-2028, and the domestic high performance MEMS gyroscope CAGR is about 42.3%.

The company has excellent R&D strength and outstanding bargaining power. The core performance indicators of the company's high-performance gyroscopes have reached the international advanced level by continuously increasing fund-raising projects in high-end scenarios. Since the company lacks rivals at the same level in China, it has bargaining power and maintains a high level of gross margin. The company raised 0.75 billion yuan to invest in the construction of high-performance MEMS inertial guidance projects to enable production capacity and R&D capabilities.

Risk warning: risk of fluctuations in raw material prices, risk of downstream application scenarios falling short of expectations, etc.