Investment logic
Three Core drivers of growth and simulated IC Industry trend
High-speed and high-precision ADC has gradually broken through: high-speed and high-precision ADC used in industrial and communication fields is monopolized by TI and ADI. The export of high-speed and high-precision ADC is strictly restricted by the "Wassenaar arrangement". Domestic replacement is imperative. The company's 16bit, 125MSPS, 4-channel high-performance ADC is the highest level of mass production in China. As more models are certified by customers, the revenue of the company's high-performance ADC products is expected to reach 45 million yuan, 95 million yuan and 135 million yuan in 2021-2023. Due to extremely high product barriers, gross profit margin is expected to exceed 60%.
The acquisition of Nanjing Weimeng to improve the layout of power management chips, a substantial increase in profits: in August 2020, the company completed the acquisition of Nanjing Weimeng. Nanjing Weimeng has a revenue of 300 million yuan in 2020, and its product line includes DC product line, AC product line and MCU product line, which complement the company's existing product line. Driven by applications such as 5G mobile phones, 5G base stations and TWS IOT devices, the demand for power management chips has increased significantly. Revenue is expected to reach 910 million yuan in 2021, accounting for 45% of total revenue, up from 35% in 2020. Gross profit margin is expected to increase 8pct-15pct due to the general sharp increase in product prices.
Jita semiconductor capacity has expanded significantly, and the company's capacity demand has been relatively guaranteed: the mature wafer foundry production capacity used by the company continues to be tight, and the Hong Kong feature process expansion project of Jita Semiconductor, a subsidiary of the controlling shareholder, will be put into production in 2020. After reaching production, the production capacity is expected to increase by more than 100%, which will, to a certain extent, guarantee the company's capacity demand and provide the basis for revenue growth.
General situation and trend of analog IC industry: the company's products power management chip and ADC/DAC are important analog IC categories. The global analog semiconductor market is 54 billion US dollars, the power management chip market is about 12.4 billion US dollars, and the ADC/DAC market is about 3.7 billion US dollars. European and American manufacturers represented by TI, ADI and Maxim (acquired by ADI) are the main suppliers of simulated IC. Simulation IC research and development depends on senior engineers, and downstream scattered, generally using mature processes, long life cycle, stable profitability. The horizontal expansion of products, the continuation of mergers and acquisitions within the industry and the migration of some products from 8 inches to 12 inches are the industry trends that we believe are taking place in the field of simulated IC.
Investment suggestion
For the first time, the company is given a "buy" rating: the company is expected to achieve a net profit of 630 million yuan, 640 million yuan and 740 million yuan in 2021-2023, corresponding to 0.89 yuan, 0.90 yuan and 1.04 yuan in EPS. With reference to the valuation level of the industry, the company is given 50 times the target value of PE in 2022, corresponding to the target price of 44.80 yuan.
Risk hint
The risk that the progress of product development is not as expected, the risk of insufficient production capacity, and the risk that the bidding of national and southern smart meters is not as expected.