Report summary

Incident: The company announced on July 28 that in the first half of 2023, the company achieved revenue (97 million yuan, +42.24%), net profit attributable to income (41 million yuan, +31.62%), net profit after deducting non-attributable net profit (0.3 billion yuan, +24.89%), gross profit margin (85.12%, -1.31 pcts), and net profit margin (42.29%, -3.41 pcts).

The company's profitability has remained at a high level, revenue performance has achieved rapid double growth; R&D investment has continued to increase, and core competitiveness has been steadily strengthened.

In the first half of 2023, the company's revenue (97 million yuan, +42.24%) and net profit (41 million yuan, +31.62%) both achieved rapid growth, and gross profit margin (85.12%, -1.31 pcts) remained at a high level. Looking at a single quarter, the second quarter of 2023 achieved revenue of 85 million yuan (+49.12%, +672.73%), and net profit for the first quarter was 47 million yuan (+38.24%, net profit for the first quarter was -0.066%), with rapid quarterly performance growth. By product, during the reporting period, MEMS gyroscopes achieved revenue of 804.47,700 yuan (+41.44%), and MEMS accelerometers achieved revenue of 7.2256 million yuan (+40.68%). The increase in the company's main business revenue was mainly due to the company's products being verified and imported by downstream users, and the gradual increase in projects entering the trial and mass production stages. The company's profitability remains at a high level. We think it is related to the fact that the company has a certain advantage in the core technology of high-performance MEMS inertial sensors and has achieved batch production with semiconductor technology companies, and production costs are relatively low.

The company has three subsidiaries and one branch of Xindong Zhiyuan, Moving Star, and Xindong Technology.

In terms of expenses, during the reporting period, the company's period expenses were 49 million yuan (+33.10%), and the period cost rate was 50.87% (-3.49 pcts), of which the sales expenses rate was 3.40% (+0.68 pcts), mainly an increase in employee remuneration. At the same time, we note that the company's R&D expenses (33 million yuan, +29.32%) and R&D personnel (57 people, +26.67%) have both increased rapidly; judging from ongoing research projects, the company continues to increase its R&D capabilities in high-performance MEMS inertial sensor applications such as high reliability, unmanned systems, measurement and mapping, and autonomous driving, which is expected to bring more competitiveness to the expansion of the company's product application scenarios.

In terms of other financial data, during the reporting period, the company's inventory was 63 million yuan, an increase of 25.57% over the beginning of the period, mainly due to an increase in raw materials and semi-finished products. Based on the company's sales model, which mainly produces and sells according to customer orders, we believe this reflects an increase in the company's on-hand business orders and that the company is actively preparing goods.

It has mass production capabilities for high-performance MEMS inertial sensors, and many products have entered trial production and mass production projects, laying the foundation for maintaining rapid growth in the company's revenue.

The company's main products are high-performance MEMS inertial sensors, including MEMS gyroscopes and MEMS accelerometers, all of which include a micromechanical (MEMS) chip and a special control circuit (ASIC) chip, which are mainly used in inertial systems. The company designs Fabless mode chips, focuses on R&D, testing and sales of high-performance silicon-based MEMS inertial sensors, and has formed a core technology system for MEMS inertial sensors.

The performance advantages of the company's main products are obvious, and it is expected to expand market space along with the expansion of industry applications.

According to the company's prospectus, the core indicators of the company's 33 series gyroscope, such as zero bias stability and scale factor accuracy, are superior to the Honeywell laser gyroscope HG1700 model and the Emcore fiber optic gyroscope EG200 model. The company's products have been applied in batches, and are continuously upgraded and iterated during the application process. The company's high-performance MEMS gyroscope products have the advantages of miniaturization, high integration and low cost. We believe that with the gradual growth of the downstream fields of intelligent driving, automotive electronics, and high reliability in the industry, it will strongly promote the widespread application of MEMS gyroscopes in the field of high-performance inertia. The company is expected to rely on its own technical strength to usher in a broad market share increase space.

The company attaches importance to R&D investment to maintain the advantages of the company's product performance and continue hematopoiesis.

As an R&D-oriented company, the company emphasizes scientific research and development, emphasizes technological autonomy, and focuses on cultivating a highly skilled R&D team. As of the end of this reporting period, the company had 57 R&D personnel (+26.67%), accounting for 45.6%. On the one hand, the company continues to increase investment in R&D, continuously improve the product nature of gyroscopes and accelerometers, and on the other hand, continues to expand the types of products developed by the company. The research projects cover pressure sensors, high-performance MEMS IMUs suitable for L3+ autonomous driving, automotive-grade functional safety 6-axis MEMS IMUs, and promote mass production of the company's R&D projects as soon as possible, which is expected to provide the company with new revenue growth points.

The company raised 1,476 million yuan in its initial public offering, of which 755 million yuan was used for high-performance and industrial-grade MEMS gyroscope development and industrialization projects, high-performance and industrialization MEMS accelerometer development and industrialization projects, high-precision MEMS pressure sensor development and industrialization projects, and MEMS device packaging and testing base projects.

The company's executives and core employees participated in the IPO strategic placement through the established asset management plan. The actual payment amount was 909.33 million yuan, and the allotted number was 3.405 million shares, accounting for 6.16% of the number of shares issued this time. The company's executives and core employees participate in strategic placement, effectively combining the company's interests with the personal interests of the core team, demonstrating confidence in the company's medium- to long-term growth.

Investment advice

We believe that 1) The company is currently one of the few enterprises in China that has achieved stable mass production of high-performance MEMS inertial sensors. The core performance indicators have reached the international advanced level, and can also reach the accuracy level of traditional gyroscopes such as optical fiber gyroscopes and gyroscopes. The advantages in size, weight, power consumption and price are obvious, and the market competitiveness is strong; at the same time, the company places importance on R&D investment to maintain advantages in the company's product performance and continue hematopoiesis; 2) According to Yole's statistics and forecasts, the global MEMS industry market size will grow from 13.6 billion US dollars in 2021 to 222.3 billion US dollars in 2027 The US dollar has a compound growth rate of 9.00% from 2021 to 2027. Benefiting from the implementation of strategies such as the Industrial Internet of Things, intelligent manufacturing, and artificial intelligence, and the accelerated development of smart cities, intelligent manufacturing, and smart medical care by governments at all levels, the MEMS market has great opportunities for development; 3) The company's initial public offering raised 1,476 million yuan, of which 755 million yuan was used for the expansion and upgrading of high-performance and industrial MEMS R&D and production capacity building. The implementation of the fund-raising project will help the company enhance R&D capabilities, enhance market competitiveness, and help the company seize the rapid development of the semiconductor industry and the MEMS sensor industry Industry opportunities, expand market share, and enhance the company's continuous profitability.

Based on the above views, we expect the company's operating income from 2023-2025 to be 301 million yuan, 409 million yuan and 566 million yuan, respectively, net profit of 143 million yuan, 183 million yuan and 244 million yuan respectively, and EPS of 0.36 yuan, 0.46 yuan, and 0.61 yuan respectively. We maintain a “buy” rating based on the company's position in the industry and future development prospects.

Risk warning

The stability of the semiconductor material supply chain fluctuates; demand for downstream applications falls short of expectations; progress in technology research and development falls short of expectations; loss of technical personnel.