Xidiwei (688173)
Existing business: the number one player in the mainland mobile phone DC / DC segment, positioning at the medium and high end
1) the company is located in the field of power management, with a global market size of 33 billion in 2020. Major overseas power management plants include Ti, ansenmey, MPs, etc. Among mainland listed companies, comparable companies include Sg Micro Corp(300661) , Wuxi Etek Microelectronics Co.Ltd(688601) , Wuxi Chipown Micro-Electronics Limited(688508) , Saiwei (to be listed), etc.
2) 1h21 company achieved a revenue of 220 million yuan, with a year-on-year growth rate of 186%. The net profit attributable to the parent company of 1h21 successfully reversed the loss, which was 20 million yuan and 40 million yuan after excluding equity payment expenses. At present, it is mainly engaged in three business lines.
3) DC / DC chip: the main business, 1h21 accounting for 75% of revenue, is mainly used for mobile phones. At present, the main customers are two main chip platform manufacturers of Qualcomm and MTK, which are integrated and shipped to downstream end customers in the form of chip sets. The company is the only mainland manufacturer in this segment. In addition, the company has been verified by several brand manufacturers and ODM manufacturers. It is expected that the proportion of end customer revenue will further increase from 2022.
4) charge pump: 1h21 accounts for 15% of the revenue. It will be shipped to Huawei in 2019 and 2020. At present, it has entered the flagship machine of oppo. It is expected that after the reduction of production capacity tension in 22 years, it will usher in rapid growth.
5) port protection and signal switching: it has been shipped since 19 years, with rapid growth in 20 years. 1h21 accounts for 9% of revenue. At present, it is shipped to all head brands of Android in mainland China.
6) from the perspective of ASP and gross profit margin, the company’s product positioning is high-end. In terms of ASP, the company ASP > 1 yuan, while other companies in mainland China are generally 0.1-0.2 yuan. In terms of gross profit margin, the company’s overall gross profit margin is close to 50%, while that of other manufacturers in the mainland ranges from 25% to 45% (due to the improvement of prosperity in 21 years, the gross profit margin is relatively high, so the gross profit margin here refers to the data in 2020 and before).
Future highlights: product category + downstream application expansion, opening up growth space
1) existing business: (1) in the company’s existing power management business, the market share of DC / DC and charge pump in the mobile phone non main chip platform integration market is 11% / 6% respectively. The main competitors are large overseas manufacturers, and there is still room for improvement in the future. (2) At present, the company is mainly used in mobile phones, and can further expand the consumer electronics market such as laptop in the future.
New business incubation: DC / AC, etc. At present, the company has established three business divisions, of which the first business division is mainly responsible for the existing three businesses, while the other two business divisions are incubating new products.
(1) the second business division (AC / DC products): develop new products AC / DC chips, mainly targeting medium and high-power products.
(2) the third business division (ACC business division, auto communication cloud): expand from consumer electronics such as mobile phones to automotive electronics.
The core team comes from large overseas factories, laying a solid foundation for the development of the company
Mr. Tao Hai, the founder / Chairman of the company, has a background in physics and electronic engineering. He has worked in Bell Labs and Fairchild for many years, and his working experience covers almost all analog chip fields. The other two founders of the company, Mr. Fan Jun and Mr. Hao Yueguo, also have working experience in Xiantong. In addition to the three founders, the “siphon effect” of the industry makes many core personnel join the company in 18 years: including Mr. David, a management talent in Silicon Valley, Mr. Liu Rui, who once worked in Maxin and IDT, and Mr. Yang Songnan, chief engineer of futurewaitechnologies.
Investment advice
We believe that the company’s growth path is different from the way many mainland semiconductor companies penetrate from low-end to high-end. Its current business has the following characteristics: 1) mainstream market rather than long tail market; 2) Focus on medium and high-end products and abandon medium and low-end products; 3) Break through one by one in the downstream, and there is no hurry to quickly improve the coverage of Guangpu material. The company’s strategy of “small but beautiful” seems to deviate from the style of “big factory”, but in fact it lays a solid foundation and does not do useless work, which is more consistent with the company’s current personnel and revenue volume. At present, the company has successfully completed the first puzzle (mobile phone DC / DC business). In the future, it will expand the second puzzle (other consumer electronics DC / DC), the third puzzle (a series of vehicle regulation chips including DC / DC) and the fourth puzzle (high-power AC / DC chip). At this moment, the tip of the iceberg of “big factory” has been uncovered. We look forward to the company assembling jigsaw puzzles one by one in the power management market of more than 30 billion US dollars in the next 10 years.
We expect that the company’s operating revenue in the years of 21, 22 and 23 will be RMB 450 / 7.8 / 1.16 billion respectively, and the net profit will be RMB 0.3/0.8/140 billion respectively. After excluding the equity payment expenses, the net profit will be RMB 0.7/1.0/140 billion respectively. According to the closing price on January 28, 2022, PE was 396 / 141 / 78 times in 21 / 22 / 23, PEG was 1.0 / 0.9 times in 22 / 23 and PS was 29 / 18 / 12 times in 21 / 22 / 23. The “buy” rating was given for the first time.
Risk tips
The progress of new product research and development is not as expected, the risk of large customer concentration, large fluctuation of gross profit margin, the risk of international trade friction, and the information used in the research report is not updated in time.
