Key points of investment:
Nor Flash: Global leader in Nor Flash, automotive-level driven growth. The applications of Nor Flash are mainly concentrated in consumer fields such as mobile phone modules, network communication, digital set-top boxes, and automotive electronics. As demand in industries such as automotive electronics and smart wearable devices continues to expand, Nor is expected to usher in new development opportunities. The leading Nor Flash companies are mainly **** and mainland manufacturers. GigaYi Innovation ranked 3rd in the world in '21 and '22, and ranked 2nd globally in '23. The company provides 16 capacity options, covering 512 Kb to 2 Gb, to meet the different storage space required for various real-time operating systems; it also has four different voltage ranges, which are 3V, 1.8V, 1.2V, and 1.65V to 3.6V wide voltage power supply product series for battery-powered applications; at the same time, it also provides up to 27 different packaging options to meet the needs of customers in different application fields for capacity, voltage and package form.
NAND Flash: Lay out SLC NAND Flash to achieve local application leadership. The company's NandFlash products are SLC NAND and provide the necessary high-capacity storage for multimedia data storage applications on mobile devices, set-top boxes, etc. The company SPI NAND Flash has achieved full product coverage in the fields of consumer electronics, industry, communications, automotive electronics, etc. The company's automotive-grade GD25/55 SPI NOR Flash and GD5F SPI NAND Flash have been widely used in smart cockpits, intelligent driving, intelligent connectivity, new energy electric vehicle-sized three-electric systems, etc., and the cumulative global shipment volume has exceeded 100 million units, providing a rich variety of options for the localization of in-vehicle applications.
DRAM: Enter the DRAM niche storage market and join hands with Changxin to fill the domestic gap. The company is actively entering the DRAM memory niche. The company's own brand DRAM products are mainly aimed at consumer, industrial control and automotive markets, and has launched DDR4 and DDR3L products. It has achieved good revenue in the fields of consumer electronics (including set-top boxes, televisions, smart homes, etc.), industrial security, network communication, etc., and continues to promote other self-developed products planned. The company's own brand OEM quota and share in the DRAM related transaction business with Changxin Storage continued to increase.
MCU: 32-bit domestic MCU leader, entering the vehicle regulation market. The company is the number one 32-bit Arm general-purpose MCU supplier in China. With a cumulative shipment volume of more than 1.5 billion units, the company has steadily ranked first in mainland China in terms of application coverage provided by 46 series of more than 600 product choices. The company introduced the first GD32H series ultra-high performance microcontroller based on the Arm Cortex-M7 core in China. As a leading domestic MCU company, the company is actively entering the automotive-grade market. On December 7, '23, the company officially launched the new GD32A490 series high-performance automotive-grade MCU, which closely meets automotive electronics development needs with advantages such as high main frequency and large capacity, and is suitable for BCM body control systems such as car windows and wipers, as well as smart cockpit systems such as instrument panels and entertainment video.
We expect GigaYi Innovation to achieve revenue of 74.3/94.0/11.12 billion yuan from 2024 to 2026, and net profit to mother of 10.5/15.5/2.12 billion yuan, corresponding to the current PE valuation 60/41/30 times. Using the comparable company valuation method, the average PE ratio for comparable companies in 2024 was 48 times. Considering the deep roots of GigaYi Innovation in the storage business and the development of MCUs, sensors, analog products and overall solutions, and its leading position in the world in Nor market shipments, it gave a valuation premium higher than the industry average, coverage for the first time, and a “buy” rating.
Risk warning
Risk of demand falling short of expectations, supply chain risk, brain drain risk