The company is the leading MEMS gyroscope in China. Its main products include MEMS gyroscopes/accelerometers/IMUs, etc., for high reliability, unmanned systems, and high-end industries. With advanced international technology, a constantly expanding product matrix under high-intensity R&D, and “shelf” product ideas, it is expected that the company will benefit from the increased penetration rate of MEMS inertial sensors in fields such as high reliability. At the same time, emerging fields such as intelligent driving and robotics are expected to open up broad development space for the company. First coverage, giving a “buy” rating.

The development of leading domestic MEMS gyroscopes is on the fast track. The company is a technology-leading domestic MEMS gyroscope leader. Its main products include MEMS gyroscopes/MEMS accelerometers/IMU (inertial measurement units), etc., which are used in high reliability, unmanned systems, and high-end industries. The company has formed a closed loop of technology in major aspects such as MEMS inertial sensor chip design, MEMS process program development, packaging and testing, etc., and has established a complete business process and supply chain system. MEMS gyroscopes and other categories are at the international advanced level. Thanks to downstream trends such as the company's technology accumulation and high reliability, the company's net revenue and profitability have increased steadily in recent years. The revenue scale in 2022 reached 227 million yuan, and the CAGR from 2020 to 2022 reached 44.54%; net profit in 2022 reached 117 million yuan, and the CAGR from 2020 to 2022 reached 45.41%; net profit margin increased from 47.47% in 2019 to 51.40% in 2022. Profitability was significantly higher than that of comparable companies.

Driven by demand from various fields, the 10 billion circuit is booming. Due to their low external dependency, inertial navigation systems and inertial measurement systems are widely used in aerospace, intelligent driving, and high-end industries. Inertial sensors such as gyroscopes and accelerometers are the main components of inertial guidance and inertial measurement systems, and MEMS gyroscopes have the advantages of miniaturization, high integration, and low cost, which is an important trend in gyroscope development. According to CCDI Consultants (quoted from the company's prospectus), China's MEMS industry reached 73.67 billion yuan in 2020, +23.2% over the same period last year. The market size is expected to reach 127.06 billion yuan in 2023; according to Toubao Research Institute, the domestic MEMS inertial sensor scale is about 13.6 billion yuan in 2021. Currently, MEMS gyroscopes are gradually replacing two-light gyroscopes in the aerospace field. IMU is being used more and more widely in high-end industrial fields. At the same time, it is expected to open up broad market space in booming emerging industries such as intelligent driving and humanoid robots, and the 10 billion circuit is booming. Currently, MEMS inertial sensors are still mainly dominated by overseas leaders such as Honeywell and ADI. Domestic enterprises are in a period of rapid development, and there is broad scope for localization.

Technology is the foundation of core and shelf transformation, driving long-term growth in multiple dimensions. The company is deeply involved in high-performance MEMS inertial sensors. The technology covers design, process development, packaging testing, etc., and the core parameters of the product have reached the international advanced level. At the same time, the company has long insisted on high R&D investment, and the core R&D team is experienced, and continues to promote product iterative expansion based on the company's leading resonant MEMS device technology. As of December 31, 2022, there are 11 ongoing research projects, covering categories such as next-generation gyroscopes, automotive IMUs, accelerometers, pressure sensors, etc., and the future product matrix iterative expansion path is clear. On the basis of technological leadership, the company adopts a shelving approach for product development and expansion, and a single product supports applications in multiple downstream fields. We believe that the shelving product idea will help the company reduce R&D and customization costs, continue to expand applications, and break through potential bottlenecks in the single market. Driven by leading technology+shelving ideas, it is expected that the company will mainly benefit from the increase in the penetration rate of MEMS gyroscopes in fields such as high reliability, while also enjoying broad development opportunities such as intelligent driving and humanoid robots. In addition, the company's IPO fundraising project focuses on product development and industrialization. Furthermore, the company has introduced equity incentives to enhance the cohesion of core talents, and long-term competitiveness is expected to be further strengthened.

Risk factors: risk of fluctuations in raw material prices; risk of new customer development; risk of fluctuating demand for highly reliable downstream orders; risk of market development; risk of cancellation of EDA authorization; risk of revocation of EDA authorization; risk of the company's technology research and development not meeting expectations; risk of unmet expectations in the expansion of emerging fields.

Profit forecasting, valuation and ratings: Driven by various fields such as aerospace, intelligent driving, and robotics, MEMS inertial sensors and IMU industry demand is expected to increase steadily. With advanced international technology, high-intensity research and development to promote product iterative expansion, and “shelf” product ideas, it is expected that the company will benefit mainly from the increased penetration rate of MEMS inertial sensors in fields such as high reliability. At the same time, emerging fields such as intelligent driving and robotics are expected to open up broad development space for the company. We expect the company's net profit for 2023/24/25 to be 1.68/2.41/329 million yuan respectively, the corresponding EPS forecast is 0.42/0.60/0.82 yuan, respectively, and the current stock price corresponds to PE 93/65/48x. Gaohua Technology, Minxin, and Beidou Xingtong were selected as comparable companies. The comparable company Wind unanimously anticipated an average PE of 53x in 2024 and an average PEG of 1.21x in 2024. The comprehensive PE method and the PEG method, referring to comparable company valuation levels, gave the company a 75x target PE in 2024, corresponding to the target market value of 18 billion yuan (corresponding to PEG in 2024, about 1.91x), covering the “buy” rating for the first time, covering the company's leading technical capabilities in inertial sensors and broad development prospects in the fields of high reliability, intelligent driving, humanoid robots, etc.