New intelligent computing products are expected to open up room for growth

Jing Jiawei released its annual report. In 2023, it achieved revenue of 713 million yuan (yoy -38.19%), net profit to mother of 596.811 million yuan (yoy -79.35%), and deducted non-net profit of 230.73 million yuan (yoy -91.16%). Among them, Q4 achieved revenue of 244 million yuan (yoy -42.53%) and net profit of 44.1051 million yuan (yoy -61.93%) to mother. Taking into account the procurement pace of downstream customers and lowering the profit forecast, net profit for 24-26 is estimated to be 2.15, 2.80, and 367 million yuan (2.22 million yuan and 323 million yuan 24-25 years ago). Using the segmented valuation method, the GPU business can compare the company's average 25E 15.9x PS. Considering that the GPU business revenue CAGR in 24-25 is 190%, which is 54% higher than the average value of comparable companies, 25E 32.0x PS is given; other businesses can compare the average 25E 20x PE and give 25E 20x PE. In summary, the company was given a target market value of 35.24 billion yuan, corresponding to the target price of 76.84 yuan (previous value of 95.86 yuan), “buy”.

The pace of short-term demand is slowing down, and it is expected that new intelligent computing products will open up market space. In 2023, the company's graphic display control products/small specialized radar/chip products will achieve revenue of 4.65, 1.32, and 101 million yuan respectively, compared to -28.62%, -42.66%, and -61.13% compared to the same period last year. The revenue of the company's various businesses declined year-on-year in 2023, mainly affected by fluctuations in industry policies, shrinking market demand and declining sales of the company's products. On March 12, 2024, the company issued the “Voluntary Disclosure Notice on the Company's New Product Development Progress”. The company successfully developed the Jinghong series of high-performance intelligent computing modules and complete machine products for application fields such as AI training, AI reasoning, and scientific computing. We believe that the company is currently in the business transformation stage, and the launch of new computing products is expected to help the company expand its market business in application fields such as AI reasoning, AI training, and scientific computing, and open up accessible market space.

Revenue picked up in 24Q1, and full-year profit is expected to recover

The 24Q1 company achieved revenue of 108 million yuan (yoy +66.27%), and the growth rate is relatively fast. It is expected that the company's revenue will begin to pick up, mainly due to the recovery of the downstream market. The 24Q1 company achieved net profit to mother of 11.5352 million yuan (yoy +83.68%) and net profit deducted from non-net profit of 17.284 million yuan (yoy +78.81%). The growth rate of return to mother/non-profit was greater than the revenue growth rate. It is expected that the main reason is that the company continues to drive changes in the IPD system and strengthen cost control.

24Q1 The company's sales/management/ R&D expenses rate was 8.06%/23.82%/64.85%, -8.57pct/-15.38pct/-51.04pct year-on-year.

Demand for AI computing power is expected to drive the company's high revenue growth

We believe that as the global model continues to be iterated, the “Scaling Law” drives the continuous increase in the number of model parameters and computational capacity, and the demand for computing power is expected to continue to grow. According to AMD, the global data center AI GPU market is 45 billion US dollars in 2023, and the market size is expected to reach 400 billion US dollars in 2027, and the CAGR will reach 72.7% in 2024-2027. In the field of computing power hardware, the company continues to promote the “specialized+universal” strategy, gradually developing products such as high-performance GPUs, modules, and complete machines to fill the gaps in the intelligent computing product line with the Jinghong series, which is expected to achieve high revenue growth in 24 to 25 years.

Risk warning: Chip production costs are rising, and downstream demand falls short of expectations.