Key points of investment:
A world-renowned high-end IC advanced packaging and testing service provider, DDIC and non-display chip packaging and testing services go hand in hand. Qizhong Technology was founded in June 2004 and has been mainly engaged in the packaging and testing of display driver chips. In 2015, the company expanded its business to the field of non-display chips (power management chips, RF front-end chips, etc.). Since 2019, the company's diversification strategy has begun to bear fruit, and the revenue from the non-display chip packaging and testing business has grown rapidly. At present, the company has formed a business pattern where the packaging and testing business of display driver chips is the main, and the non-display chip packaging and testing business goes hand in hand.
The display driver business benefited from a recovery in downstream demand. Omdia expects that due to the arrival of a new replacement cycle, panel shipments for major applications including mobile phones, mobile PCs, and TVs are expected to resume growth. Demand for DDIC is expected to increase 6% year over year to 8.48 billion units in 2024. The display driver chip packaging and testing business has been a key area of development since the company was established. The display driver chips packaged and tested by the company include DDI and TDDI, which can be used in mainstream display panels such as LCD and AMOLED. According to statistics from CCD Consultants, in 2019-2022, the company showed that driver chip packaging revenue and shipment volume ranked first in China and third in the world. The recovery of the industry is expected to drive the company's display driver chip packaging and testing business to continue to improve.
The non-display chip business began a second growth curve. The company expanded its business to the field of non-display chip packaging and testing in 2015. Currently, this field has become a key component of the company's business and a key sector for future development. The products packaged by the company are mainly power management chips and RF front-end chips. A few are MCU, MEMS (microelectromechanical systems) and other types of chips, which can be widely used in downstream applications such as consumer electronics, communications, home appliances, and industrial control. Since 2019, the company's diversification strategy has begun to bear fruit. The revenue of the non-display chip packaging and testing business has grown rapidly, and the share of revenue has continued to rise.
Profit forecast, valuation analysis and investment advice: We expect the company to return net profit of 3.50/4.71/751 billion yuan to the parent company in 2023-2025, an increase of 15.4%/34.5%/59.5% over the previous year. The current stock price (2023/12/14) corresponding to PE is 47.4/35.3/22.1 times, covering the “buy-A” rating for the first time.
Risk warning: technical risks, increased market competition, macroeconomic fluctuations, non-obvious market expansion risks.