Main points of the report
Leading manufacturers of wireless SoC chips welcome the inflection point of performance
The company is a leading manufacturer of SoC chips for wireless communications, benefiting from a substantial increase in revenue from the ETC market in 2019. With the decline in market demand for ETC stock, the performance declined in 2020, but the company actively enriches its product line and vigorously develops the Bluetooth chip market for TWS headphones. At the same time, it vigorously develops the existing Wi-Fi chip business. As the global epidemic alleviates in 2021, the demand for smart homes and other downstream demand picks up. TWS and other incremental markets began to expand and ETC pre-loading market started, the company's performance will usher in an inflection point.
TWS's new products produce goods in volume, and the pure incremental market is worth looking forward to.
The market of Bluetooth master chip for TWS headset is gradually mature, and the competition among manufacturers is fierce. The high-end market is represented by Apple Inc, Qualcomm Inc, Heng Xuan and Huawei, while the middle and low-end markets include Luoda, Ruiyu, Jieli, Zhongke Lanxun and Broadcom Ltd integration. At present, domestic manufacturers have become the main choice for brands and white-brand manufacturers by virtue of the cost-effective advantage of high performance and low price, leading the TWS main control chip market in shipments. According to the data of rising Sun big data, the global shipment of 420 million TWS headphones in 2020 is expected to reach 670 million in 2021, of which the middle and low end of the market with less than 1,000 yuan is in strong demand, accounting for more than 80 percent of the shipments of headphones under 1,000 yuan in 2020. Broadcom Ltd integration previously lacked mid-and high-end Bluetooth chips specifically for TWS headphones, and shipped low in the TWS market. In 2020, the company launched TWS mid-and high-end chip BK3288, including active noise reduction, Bluetooth low power consumption and other functions, mainly hit the middle and high-end market, and has a high performance-to-price advantage. We expect that with the continued popularity of the TWS headset market and the promotion of chip localization. The company is expected to see a substantial increase in shipments in the TWS market in 2021 with new products, and its performance will usher in a new increase.
The Wi-Fi market warms up, and the second spring of ETC preinstallation drives the performance to take off. In 2020, the company vigorously develops the Wi-Fi chip business, and with its rich product line layout, it expands the high-quality customers of appliances such as Tuya Inc. and Mei. at the same time, the company gives full play to its cost-effective advantages to actively seize the smart home market share and obtain larger income. We expect the smart home market to pick up in 2021. The company's Wi-Fi chip shipments will increase significantly. In the ETC market, with the end of the six-month transition period, we expect the installation market to start before 2021. As the absolute leader in this field, the company is expected to usher in the second spring of the ETC market with the first domestic ETC chip certified by the international authoritative third-party laboratory ISE laboratory. Overall, the company's three major business inflection points have arrived, performance is expected to usher in take-off.
Investment advice and profit Forecast
We are optimistic about the company's market position in the field of wireless SoC chips. With the magnificent demeanor of the TWS market, the penetration of the downstream market of Wi-Fi chips and the launch of the ETC pre-installation market, the company's performance is expected to usher in high growth under the resonance of the three major businesses. It is estimated that 2020-2022 revenue of 8.86,12.06,1.507 billion yuan, return to the mother net profit of 0.85,2.73,362 million yuan, corresponding to PE for 132,41,31 times. Taking into account the company as an industry leader, the company's business has a high growth, give the company a "buy" rating.
Risk hint
(1) the expansion of brand customers in the TWS market is not as expected; (2) the downstream recovery of Wi-Fi chips is not as expected; (3) the industry competition aggravates the risk of price reduction.