The volume of the software business is expected to drive high revenue growth
Guangliwei released its semi-annual report. In 2024, H1 achieved revenue of 0.172 billion yuan (yoy +34.86%), net profit to mother of 2.5362 million yuan (yoy -88.90%), deducting non-net profit of 3.5256 million yuan (yoy -121.71%).
Among them, Q2 achieved revenue of 0.128 billion yuan (yoy +21.21%, qoq +191.25%) and net profit of 25.4347 million yuan (yoy +35.21%, qoq +211.08%). Considering the pace or delay in commercializing the company's software products and lowering the profit forecast, the company's 24-26E EPS is expected to be 0.73, 1.09, and 1.66 yuan, respectively (previous values of 1.01, 1.53, and 2.29 yuan). Using the segmented valuation method, the software business can compare the company's average 25E 13.2x PS. Considering that the 24-25 software business revenue CAGR was 118%, which is 26% higher than the average value of comparable companies, giving the software business 25E 18.5x PS; the testing machine business can compare the company's average 25E23.0x PE, giving 25E 23.0x PE. In summary, the company was given a 25-year target market value of 10.86 billion yuan, corresponding to a target price of 54.30 yuan (previous value of 64.19 yuan), to “buy”.
High R&D investment lays down the company's long-term competitive barriers
24H1's sales/management/ R&D expenses rate was 10.96%/12.66%/76.87%, +0.62pct/+0.78pct/+3.75pct. Among them, the R&D cost rate increased a lot year-on-year, mainly because the company continued to increase investment in R&D of new EDA software tools, 24H1 R&D expenses increased 41.77% year on year. We believe that as a knowledge/patent-intensive industry, the EDA industry is expected to consolidate long-term competitive barriers for enterprises. 24H1's net operating cash flow was -81.0379 million yuan, +56.81% year-on-year, and 23H1 operating cash flow was -0.188 billion yuan. The year-on-year change was mainly due to a decrease in the purchase volume of testing machine components.
24H1 software business revenue is growing rapidly, and software and hardware collaboration is expected to seize more market share. 24H1's testing equipment and accessories, software development and licensing business achieved revenue of 0.111 and 0.061 billion yuan respectively, +17.21% and +86.81% over the same period last year. 24H1's software business revenue grew at a high year-on-year rate, mainly due to the acceleration of the company's EDA software commercialization pace against the backdrop of a gradual recovery in industry sentiment. In terms of design tools EDA, the company continues to expand its software product line and launch new products such as testability design (DFT) tools and manufacturability design (DFM) tools; in terms of data analysis systems, it extends the original electrical test data analysis tools to semiconductor data software systems throughout the integrated circuit life cycle. We believe that the products required for all aspects of improving yield are closely linked. As the company's software capabilities continue to deepen, the software and hardware synergy advantages are expected to drive the company's market share further.
The wave of domestic substitution is expected to boost the company's high revenue growth
We have seen that due to changes in the international trade environment and due to supply chain security considerations, more and more domestic high-performance chip manufacturers are shifting their streaming business to domestic fabs to complete. However, the establishment of a new production line requires the procurement of localized yield improvement tools to quickly break through process difficulties in advanced manufacturing processes or new product design plans. With the efficiency advantages brought by software and hardware collaboration and the first-mover advantage in core links, the company is expected to fully benefit from domestic replacement opportunities and achieve high revenue growth in 24-25 years.
Risk warning: Downstream prosperity falls short of expectations; market competition intensifies.