Leading domestic firmware, maintaining a “buy” rating
The company released the first quarter report of 2023. The company's revenue grew steadily, and the performance was in line with our expectations. An AI server must have BIOS and BMC firmware. As a domestic firmware leader, the company is expected to fully benefit from the AI wave. We keep our profit forecast unchanged. We expect net profit from 2023-2025 to be 0.02, 15.1, 221 million yuan, EPS of 1.18, 1.74, 2.54 yuan, and the corresponding PE of the current stock price is 64.4, 43.5, 29.9 times, maintaining the “buy” rating.
Event: The company released the first quarter report of 2023
(1) In the first quarter of 2023, the company achieved revenue of 64.68 million yuan, an increase of 24.58% over the previous year; achieved net profit of 6.77 million yuan, down 57.87% from the previous year; achieved net profit of 2.36 million yuan after deducting non-return mother net profit of 2.36 million yuan, a year-on-year decrease of 79.60%, mainly due to share payment fees that dragged down profit growth. After excluding 7 million yuan of share payment fees generated by equity incentives, the company achieved net profit of 13.77 million yuan. (2) The company's sales, management, and R&D expenses ratios were 2.19%, 26.50%, and 16.18%, respectively -0.87, +14.39, and -5.54 percentage points over the previous year. The increase in management expenses was due to an increase in major share payments.
The AI server must have BIOS and BMC firmware. The company will fully benefit from the AI wave (1) leading domestic firmware, with significant competitive advantage. The BIOS and BMC firmware industries have a high entry threshold and an excellent competitive landscape. The company is one of the four mainstream X86 firmware suppliers in the world. In the context of Xinchuang, it has significant advantages over overseas manufacturers. Compared with other domestic manufacturers, the company already has the ability to develop mainstream domestic chips, and at the same time has an advantage in x86 firmware, and its market share is expected to continue to expand.
(2) The AI arms race drives the increase in demand for AI servers, and the company is expected to fully benefit. It is necessary that with the popularity of AIGC, major domestic and foreign manufacturers begin an AI arms race, AI computing power is expected to maintain a high boom, and AI server predictions will usher in a new round of procurement demand. AI servers also require BIOS and BMC firmware, and the value is expected to increase. As a domestic leader, the company is expected to fully benefit.
(3) In line with the general trend of innovation and innovation, the company's long-term growth is prominent. The company launched the firmware framework platform BYOCore 2.0 to open up domestic chips and operating systems to form a secure closed loop. BIOS products have been sold to domestic chip manufacturers such as Haiguang, Kunpeng, Zhaoxin, Feiteng, and Longxin. Driven by Xinchuang, the company's long-term growth has been outstanding.
Risk warning: The localization process is lower than expected; prices are falling due to increased competition; labor costs are rising faster.