Incident: The company released its 2022 mid-year report. During the reporting period, it achieved revenue of 1,164 million yuan, an increase of 62.15% over the previous year; Guimu's net profit was 242 million yuan, an increase of 74.64% over the previous year; after deducting non-return mother's net profit of 227 million yuan, an increase of 68.05% over the previous year.
Results for the first half of the year exceeded expectations, and Q2 increased sharply from month to month. The company achieved revenue of 649 million yuan in Q22, an increase of 28.34% over the previous year and an increase of 26.15% over the previous year; Guimu's net profit was 141 million yuan, an increase of 35.19% over the previous year, an increase of 38.43% over the previous year; after deducting net profit of non-Gumo, an increase of 31.56% over the previous year, an increase of 39.56% over the previous year. Looking at the profit level, the company's gross profit margin in the second quarter was 39.00%, up 1.29pct from the previous quarter; the net profit margin was 20.36%, up 2.27pct from the previous quarter. On the cost side, the company's management expenses in the first half of the year were 54 million yuan, an increase of 75.07% over the previous year, mainly due to the valuation value-added amortization of intangible assets generated by the merger and acquisition of Mouxin Technology; R&D expenses amounted to 152 million yuan, an increase of 22.41% over the previous year.
The leader in the post-security era of Hisilicon, mass-produced new products and released high-end products. The company is a leading domestic security chip manufacturer, with a complete front-end and back-end product line. The three major businesses 1) professional security 2) smart hardware 3) automotive electronics achieved revenue of 780 million yuan (+70.38% year-on-year), 225 million yuan (+47.44% year-on-year), and 132 million yuan (+46.77% year-on-year) respectively in the first half of the year. The main business of the subsidiary Mouxin Technology is the main processor SoC chip for back-end equipment (DVR, NVR, etc.) of intelligent video surveillance systems and the main processor SoC chips for smart home electronic devices with a screen display. New products were successfully introduced during the reporting period, and mass production and delivery have been carried out to downstream customers. Since the withdrawal of Hisilicon, the security chip market pattern has been reshaped. We believe that for security supply chain customers, a complete product line and supply chain security are the two key elements. In addition to ensuring a stable supply of chips required for business to ensure business continuity, higher requirements have also been placed on a complete product line. The company is currently one of the few security chip manufacturers in mainland China that has front-end and back-end IPC and NVR solutions. After acquiring Mouxin, it has a one-stop supply capacity for front-end and back-end chips. We believe that the company currently has a comprehensive layout in the security chip market, has a great advantage in the post-security era of Hisilicon, and is expected to become a leading manufacturer in the domestic security chip market.
New businesses such as smart IoT and automotive are expanding smoothly, opening up room for long-term development. In the field of AIOT smart IoT, the company is a video IoT chip strategic partner for the three major operators, providing them with competitive video chip solutions; at the same time, it maintains long-term strategic cooperation with leading domestic smart home manufacturers and solution providers; in the field of smart car dealerships:
The company has formed a series of competitive products represented by “professional vehicle regulation ISP+ analog video link chip+vehicle DVR chip”, from in-vehicle rear-mount to in-vehicle front-loading, and from in-cabin to outboard, covering a complete car-grade video chip product line for front-end cameras, transmission links, and back-end hosts. Various chips have passed AEC-Q100 vehicle regulations certification to help promote the localization process in this field. With the rise of self-assisted driving ADAS, artificial intelligence (AI), and new energy vehicles, and the spread of modern transportation methods, in-vehicle cameras are entering a period of rapid growth. We judge that the company is expected to use its technical strength to continuously expand the second and third growth curve and open up room for long-term development.
Investment advice: Considering the company's competitive advantage in the post-Hisilicon era of security chips and the smooth expansion of new business, net profit for 2022/2023/2024 is estimated to be 552/699/876 million yuan respectively. The corresponding PE is 27/21/17 times, maintaining the “buy” rating.
Risk warning events: The impact of the epidemic on downstream demand may fall short of expectations, the increase in upstream foundry costs falls short of expectations, the launch of new products falls short of the expected risks, and the risk that research data is not updated in a timely manner.