With the triple resonance of demand, supply, and policy, domestic EDA is expected to accelerate its rise. According to the Huajing Industrial Research Institute, the global EDA market space in 2022 was 15 billion US dollars, the growth rate was 12.78%, and the industry maintained a relatively rapid development. However, in terms of pattern, leading overseas EDA companies monopolize about 90% of the market, while domestic EDA companies generally have a small revenue volume, and only have a leading edge in some full-process tools or point tools. However, on an optimistic note, in recent years, China's EDA industry has ushered in three marginal changes: 1) demand: domestic integrated circuits have become the world's leading Fabless and Foundry manufacturers, which guarantee the demand for domestic EDA tools; 2) Supply: China's EDA enterprises have gradually enriched their talent reserves, and with the help of capital, technology iteration is expected to accelerate in the future; 3) Policy: The country has introduced strong support policies one after another. We believe that under the triple resonance, the rise of domestic EDA is expected to accelerate.
Gyulun Electronics: A domestic EDA manufacturer with global competitiveness
Founded in 2010, Gyulun Electronics is one of the few domestic EDA companies with globally competitive products. The company started with device modeling tools in manufacturing EDA. Since the product was released, it has been adopted by the top ten global fabs and has been widely recognized in the international market. With the development of the semiconductor industry and the increase in domestic demand for autonomy and control, the company followed the trend of expanding its business layout into the field of design EDA and testing tools through endogenous R&D and external acquisitions, and still maintained the characteristics of global competitiveness of its products.
How do you view the company's growth: Revise the poor expectations for market space Currently, the biggest gap in market expectations for the company lies in the industry space, that is, some investors believe that the company only focuses on the niche market of device modeling, and the ceiling is low. However, we believe that whether it is expanding segments in manufacturing EDA or deploying full-process tools in design EDA, the company continues to open up accessible market space. Specifically, 1) The company has basically covered all aspects of the process platform development stage in manufacturing EDA, and the global market capacity of manufacturing EDA tools in 2021 is about 650 million US dollars, which is far greater than the company's current revenue volume; 2) the growth momentum of design EDA mainly comes from the introduction of the company's pan-analog circuit full-process tools, which are expected to achieve breakthroughs in ecological barriers and achieve leapfrog development in the context of industry autonomy and control.
Investment advice:
The company is an EDA company with few domestic products with global competitiveness. Currently, it has fully benefited from the development of the domestic semiconductor industry and independent and controllable opportunities. At the same time, it has gradually expanded from manufacturing EDA to full-process design EDA through endogenous R&D, epitaxial acquisition, and ecological construction. The basic performance is stable, and the development space is broad. We expect the company's revenue for 2023-2025 to be 376/4.94/644 million yuan, respectively, and net profit of -0.02/0.01/16 million yuan respectively. First coverage, giving a buy-A investment rating, the six-month target price is 33.79 yuan, which is equivalent to a dynamic market sales rate of 39 times in 2023.
Risk warning:
1) Risk of new product development not progressing as expected; 2) risk of overseas market; 3) risk of downstream market demand falling short of expectations; 4) risk of not being able to find acquisition or strategic investment targets; 5) risk of loss of technical personnel; 6) risk of failure to assume expectations.