Event comment
The company recently released an interim report of 2022. In the first half of 2022, the company achieved operating income of 1.702 billion yuan, an increase of 50.83% over the same period last year, and a net profit of 531 million yuan, an increase of 172.99% over the same period last year. The net profit after deducting non-return was 519 million yuan, an increase of 220.88% over the same period last year.
Investment suggestion
The company's revenue and performance rose sharply in the second quarter. From a sub-sector point of view, security and identification chips achieved business income of 246 million yuan, + 23.57% year-on-year; smart meter chips achieved business income of 174 million yuan, + 177.86%; and FPGA and other chips realized business income of 222 million yuan, + 120.84% year-on-year. FPGA growth is strong, security and identification chip plate and smart meter chip plate performed better than expected in the second quarter. In the field of security and identification chips, the company steadily increases the sales of this category of products by optimizing product performance and actively expanding new areas; the intelligent meter chip plate, the company actively improves the supply chain, and maintains a high gross profit margin of intelligent meter chips through mass production of new products and price adjustment; at the same time, MCU is well expanded in the general field and has achieved mass production in multiple application fields.
FPGA products are marching towards more advanced processes, and PSoC products are widely used in the future. The company's FPGA chip business is growing rapidly, and the future FPGA products will be iteratively upgraded to a new process, which will be more widely used; PSoC will be used in cloud data centers, AI and computer vision, multi-system and high security requirements for automotive electronics applications. The company is the leading manufacturer of domestic FPGA and PSoC products, and the funds raised have also been invested in the research and development of new PSoC products. Coupled with the high gross profit margin of this business line, the sales revenue and profit level of the company's products will be significantly improved in the future.
The company's multi-line products have been certified by car regulations and are expected to enjoy the development dividend of the new energy vehicle market.
At present, the company has a variety of products have passed the AEC-Q100 automotive specification parts certification, is gradually introduced into the automotive electronics market. Smart card and security chip FM1280 chip, intelligent device chip FM17 series read-write chip products, the first car specification Grade level 1 high-capacity EEPROM, car gauge level MCU and other products have completed the AEC-Q100 certification. In the future, with the growth of the domestic new energy vehicle market and the deepening of the electrification of auto parts, the company's car regulation products are expected to greatly expand the sales scale.
The demand for FPGA and memory products in the field of high reliability is strong in the future and is expected to continue to increase. Due to the high gross profit margin in the field of high reliability, the company's FPGA and memory products will tend to customers in the field of high reliability when the supply of capacity is insufficient. The downstream customers of highly reliable products are also relatively stable and will not easily replace certified suppliers. In the future, the market demand for high reliable areas is relatively large, and the company will actively seek production capacity growth. When the supply of some materials and testing services is improved, this field is expected to continue to drive performance growth in the future.
As one of the leading companies in the domestic FPGA industry, the company benefits from the domestic substitution trend in the future, and the company also optimizes the product structure in the field of security and identification chips and smart meter chips, and actively expands to many fields. We estimate that the net profit of 2022 / 2023 / 2024 will be $1.47 billion respectively, based on the closing price of $61.95 on August 16, 2022, which corresponds to a PE multiple of 61-44-36, giving a "recommended" rating for the first time.
Risk hint
Chips such as FPGA are not advancing as fast as expected, new product research and development and new areas are not as expected, and the competitive environment is deteriorating.