A comprehensive analog IC platform company where signal chains, power management, and sensors are in full bloom. The company was founded in 2013 to develop products around the downstream high-barrier market, focusing on the three major product directions of sensors, signal chains, and power management. By 2024, the mid-year report had more than 2,100 product models. In 2023, the three accounted for 13%, 54%, and 33% of total revenue, respectively. It is one of the few leading analog ICs in China and has a layout in three major directions. In terms of sensors, magnetic sensors, pressure sensors, temperature/humidity sensors, etc. As a highlight, magnetic sensors are rapidly released. The signal chain is fully blossoming from isolation to the general signal chain. Isolation drives are the best products in power management, leading the world in material abundance, and non-isolated power ICs such as motor drives are rapidly expanding, and the increase in product categories and marketable parts has fully opened up the growth ceiling.

Focus on high-barrier markets such as automobile/pan-energy, and differentiated competition in the blue ocean market. The company's management has strong forward-looking layout capabilities. At the beginning of its establishment, it mainly focused on consumer electronics, then explored opportunities in the automotive and pan-energy markets earlier. It entered the industrial, new energy, and automobile markets in 2016. It has now formed systematic solutions in the automotive, new energy, industrial control and other markets, and has established a deep customer base. Since automobiles and pan-energy are all high-barrier blue ocean markets, there is broad space for domestic production alternatives. Looking at downstream applications, the company's revenue share for automotive electronics, pan-energy, and consumer electronics in 2023 was 30.95%, 59.52%, and 9.51%, respectively. The automotive electronics sector has formed 10 major solutions including OBC, main drive, and BMS, involving 20+ segments. The new energy sector has formed solutions such as charging piles, photovoltaic inverters/energy storage/storage conversion, etc., and industrial control has formed 6 major solutions including motors, PLC systems, and servo controllers.

Excellent talent team and system design work together to build strong R&D strength. The company's R&D strength is intuitively reflected in the rapid growth of product categories and models, from mainly products such as signal conditioning, digital isolation, and “isolation +” before launch, to the rapid enrichment of the sensor, general signal chain and power management product matrix over a year after launch. The number of product models ranged from more than 800 models at the end of June 2021 to more than 2,100 models in mid-2024, and most of the new products launched can be quickly released. The formation of strong R&D strength is the foundation for a team of experienced engineers. Scientific and reasonable R&D processes and quality management systems are catalysts, enabling outstanding talents to play their full role and achieve the effect of doing more with less.

Management is highly complementary, and excellent corporate governance is the cornerstone of long-term growth. Mr. Wang Shengyang, chairman and general manager, and Mr. Sheng Yun, vice president and head of R&D, are all former ADI engineers. Both have a deep technical background and broad international vision. Mr. Wang Yifeng is a product manager and market background. The three are highly complementary in technology, market, and strategic division of labor and coordination, which is conducive to the construction of the company's comprehensive competitiveness. The core technician Mr. Chen Qihui has worked for Marvell, and the core technicians Ma Shaoyu, Zhao Jia, and Ye Jianzeng have all worked for ADI and have rich R&D experience in major international companies. The above executives and core technical personnel are all post-80s. This is a time when the company is strong, which is expected to drive the company's rapid development.

The downturn cycle successfully withstood the test, and product sales bucked the trend. In this downward cycle, the company's forward-looking layout and R&D strength helped the company stabilize its market position and successfully relayed growth. Under price pressure, product sales still achieved a high year-on-year growth of 33.4% in 2023. Currently, quarterly revenue has been growing for 5 consecutive quarters. In the future, with multi-dimensional cost reduction and efficiency, gross margin and profitability are also expected to improve.

Investment advice: The company has formed a certain leading edge in the domestic automotive simulation IC and other high-barrier markets, continues to launch difficult new products, and is expected to achieve high growth in the future with the opportunity of localization of high-end analog ICs. We expect the company's 2024-2026 revenue to be 1.925/2.945/3.681 billion yuan, and the corresponding PS for the 2024/12/30 closing price will be 9.9/6.5/5.2 times. The comprehensive analog chip company with the highest revenue among domestic analog chip companies was selected as a comparable company. The average PS for 2024-2026 was 10.4/8.0/6.4 times, respectively. Nanochip's 2024-2026 PS multiples were lower than those of comparable companies, and the first coverage gave the company an “gain” rating.

Risk warning: downstream prosperity falls short of expectations; progress in improving the competitive landscape falls short of expectations; risk of lagging data and information; risk of untimely and incomplete compilation of public information