Company profile: Leading baseband supply capacity, full coverage of cellular IoT networks

Aojie Technology was founded in 2015. Through endogenous self-research+exogenous mergers and acquisitions, it acquired Alphean, Jiangsu Zhiduoxin, and Marvell mobile communications businesses respectively in 2015-2017 to complete the initial accumulation of 2G to 4G communication technology; acquired Zhiqing Information in 2019 to achieve the accumulation of artificial intelligence technology; and completed the accumulation of high-end smartphones in 2021. The company's core team has a deep technical background. Founder Dai Baojia has been deeply involved in the field of wireless communication chips for many years, and the team has strong technical strength. In 2004, they founded Redico (RDA), breaking the situation where China's RF chip market is basically monopolized by foreign semiconductor companies. The company's products are mainly cellular baseband chips, accounting for 76.8% in 2022. With the rapid development of the cellular IoT market and the explosion of applications such as downstream mobile broadband devices, smart energy, and smart payments, the company's main business is growing steadily. In addition to cellular baseband chip products, non-cellular IoT chips, chip customization, and semiconductor IP licensing businesses have also maintained a rapid growth trend in recent years. In recent years, the company's revenue has continued to grow, and loss exposure has narrowed year by year. At the same time, the company's comprehensive gross margin has reached 37.13%. The company's gross margin is expected to continue to be optimized as the scale effect expands, market share expands, and profitability increases due to the continuous launch of new products and the continuous expansion of new fields.

IOT+ mobile phone baseband space is vast, and the time is right for domestic replacement

The IoT industry is still in a dividend period of industry development. The industry growth rate is strong. It is expected that the global scale of cellular IoT communication connections will continue to grow at a compound growth rate of 10.8%. The cellular baseband chip market is mainly composed of the cellular Internet of Things and the mobile phone market. Corresponding terminal manufacturers can be roughly divided into modules and mobile phone manufacturers: 1) Domestic module manufacturers in the cellular IoT market are extremely competitive. Four of the top five IoT module suppliers in the 2023Q1 data come from China, and domestic manufacturers account for 56.7% of the share. The increase in the share of midstream communication module manufacturers has brought broad space to domestic chip manufacturers. Local manufacturers have various advantages such as location, price and service, and are expected to further enter well-known downstream supply chain manufacturers The share of foreign food manufacturers, as of In 2022, Aojie Technology's cellular IoT chip shipments accounted for nearly 10% worldwide; 2) Although the current smartphone penetration rate in the mobile phone market is high, there is still a large market space and structural demand for functional devices in emerging markets represented by Africa and India and underdeveloped regions in various countries. The mass-produced version of the company's 4G smartphone chips has been successfully distributed in 2023Q1 and is expected to gradually enter the commercialization process. Currently, the 5G baseband has room for growth. The company still has room for imagination to grow in the field of functional machines and 4G, achieving a breakthrough leap from 0 to 1.

High barriers+broad prospects, multi-level product lines open up new fields

As a scarce baseband chip design company in China, the company has obvious competitive advantages: 1) Baseband chips are the core components of various terminals and devices to achieve cellular mobile communication, and have high R&D, technology and production barriers. The company's accumulation of cellular baseband/mobile terminal chip technology has basically achieved benchmarking with leading manufacturers, and is one of the few domestic suppliers that have the opportunity to enter the smartphone 5G baseband chip market; 2) Since its establishment, the company has focused on various types of wireless communication technologies to build a complete wireless communication chip development system, gradually expanding from cellular to non-cellular communication fields, rich products The matrix is in line with industry trends and meets the needs of different types of customers; 3) The basic market of the IoT field is stable, bound to major downstream module manufacturers, and at the same time, there are major customer breakthroughs in other new fields.

Profit forecasting

The company's revenue for 2023-2025 is estimated to be 26.41/35.75/4.918 billion yuan; net profit is -5.15/-2.51/62 million yuan, which is expected to gradually reverse losses. The corresponding PS is 10x/8x/6x respectively, covering the first time, giving a “buy” rating.

Risk warning

1. Market competition increases risk;

2. Downstream IoT demand falls short of expectations.