Incidents:
Zhonghe Technology recently issued a fixed increase announcement. The company plans to issue shares to specific targets to raise no more than 1028.96663 million yuan in total capital. The funds raised will mainly be used for “digital twin industrial control platform development and industrialization projects based on self-developed chips”, “digital key technology research and development and industrialization projects in the field of major transportation”, “unmanned technology research and development projects”, and “supplementary liquidity”.
Using smart transportation as the basic market, the semiconductor circuit is laid out in multiple points. (1) Smart transportation business. Zhonghe Technology's smart transportation business includes engaging in research and development of urban rail traffic signal systems, automatic ticket sales and inspection systems, development of key equipment, and system integration. The company's 2023H1 smart transportation business achieved revenue of 531 million yuan, corresponding gross margin of 20.76%. Currently, the company has nearly 20 subsidiaries, covering 28 cities across the country, including Hangzhou, Zhengzhou, Xi'an, Chengdu, and Shenzhen. It has established a relatively complete sales channel network, won high recognition from many owners of the Shenyang project, Chongqing project, Dalian project, etc., and has maintained relatively good cooperative relationships.
(2) Pan-semiconductor business. Through the acquisition of Japan's Matsuzaki Seisakusho in 2017, the company opened up the Japanese market and introduced 8-inch light mixing technology into the country. In 2019, full coverage of the heavy mixing series products was achieved. At present, a medium to large monocrystalline silicon production base has been established in Taiyuan, Shanxi. The production capacity will be three times that of the present, laying the foundation for the subsequent increase in Haina production. In 2023, the company will establish a polishing pad production base in Jinhua. The company follows “one core, multiple highlights” and invests in the field of localization of chips and equipment, such as infrared detector chips, semiconductor electroplating cleaning equipment, etc.
Spatio-temporal big data opens the second curve. According to the company announcement, Zhonghe, Lanco Technology, Inspur Cloud and other organizations launched the “Spatio-Temporal Big Data Cloud Center System Project”, led by Academician Wang Jiayao, the founder of the space-time big data theory. Through the establishment of a national urban spatio-temporal data service grid with Qingyang in the west and Shaoguan in the east as the total nodes of “East Digital and Western Computing”, they created an intelligent application service model for the spatio-temporal big data industry based on the integration of a nationwide distributed elastic cloud integrated grid. A general spatial and temporal big data platform service and industry model was launched; among them, Qingyang Spatio-Temporal Data Center is led by Zhonghe Technology, and has clearly defined Built at the Qingyang Spatio-Temporal Big Data Cloud Center Facing a nationwide spatial and temporal data computing power base, build a computing power center that radiates the whole country; achieve specific goals such as thermal calculation of economic data in the north-west watersheds and urban agglomerations.
Profit forecast: Spatio-temporal big data opens up the company's second growth curve. It is estimated that the company's operating income for 2023-2025 will be 26.2/29.0/ 34.8 billion yuan, respectively, and net profit for 2023-2025 will be 0.6/1.15/182 million yuan respectively, and the corresponding PE will be 89/ 46/ 29 times, respectively. 2024E was given 55 times the profit PE valuation, corresponding to the target price of 11.4 yuan, covered for the first time, and given a “buy” rating.
Risk warning: Spatio-temporal big data progress falls short of expectations