Recommended logic: 1) The shipment volume of Ziyi Innovation MCUs is expected to exceed 600 million units in 2022, and the consumer electronics and industrial control fields are expected to accelerate the replacement of ST with performance and price advantages; 2) The share of demand for high-capacity NOR products in the company has increased, and subsequent demand for vehicle regulations is expected to provide a new growth point; 3) The company's self-developed 19 nMDDR4 has a price advantage over its peers, and it is expected that the company's market share of the global niche market will increase to 1.5% in 2024.
The company is expected to lead the localization process in the downstream market through continuous iterative upgrades of MCU products. According to iCInsights data, the global MCU market size was 19.49 billion US dollars in 2021, the global MCU market is expected to reach 27.27 billion US dollars in 2026, and the CAGR will remain 6.9% in the next five years. The company's MCU product models exceeded 400, and in the future, the standard ST will become a domestic “MCU department store” to increase the domestic market share. Furthermore, the company's first vehicle grade, GD32A503, has been successfully launched, mainly used in the fields of body control, lighting systems, smart cockpits, and motor power systems. Subsequent GD32A5 and GD32A7 series products will continue to be applied to high-end vehicle regulations. We believe that Zhaoyi MCU products are expected to continue to enjoy domestic substitution dividends in the industrial control and automotive fields, and that the domestic market share is expected to rise to over 8.8% in 2024.
NOR's business structure is upgraded, and it is expected to become the second largest supplier in the world in 2024. Looking at NOR downstream demand, demand for industrial control and automotive intelligence has led to the growth of high-capacity NOR products. In 2022, H1's 55nm SPINOR Flash accounted for nearly 70%. The 40 nm process NOR is being actively promoted, and the NOR product structure is moving towards high-value medium to high capacity and will drive revenue growth. We expect the company's global market share to reach 21.7% in 2024 against the backdrop of increasing demand in downstream IoT, automotive electronics and other fields.
Self-developed DRAM is expected to be released rapidly in 2022. The company expects to purchase its own brand OEM from Changxin Storage in 2022 for about 860 million yuan, a significant increase over the amount of about 200 million yuan in 2021. According to our estimates, the global niche DRAM market was around $7.44 billion in 2021 and is expected to reach $0.9 billion by 2024. Megayi's 19 nm DDR4 has cost and price advantages over 20 nm process products in the industry. It is expected that in the future, through the reuse of NOR sales channels and the rapid release of customer resources, we expect the company's share of the global niche DRAM market to rise to more than 1.5% in 2024.
Profit forecast and investment advice: We expect the company's net profit to parent in 2022-2024 to maintain a compound growth rate of more than 11.8%. Considering the company's strong MCU technology strength, it is expected that China's MCU localization process will continue to be promoted in the future, and the storage business has broad room for growth. We gave the company 35x PE in 2023, a corresponding target price of 140.35 yuan, and gave it a “buy” rating.