Gigadevice Semiconductor (Beijing) Inc(603986) (603986)
Core view
Event: the company issued the announcement on the estimated amount of daily connected transactions in 2022.
The self-developed DRAM continues to expand, and DDR3 and DDR4 are expected to increase significantly. The company announced that it expects to purchase DRAM OEM from related party Changxin storage in 2022, with an amount of about US $135 million. From January to November 2021, the company purchased DRAM from Changxin storage, with an actual amount of US $30 million. The estimated purchase amount in 2022 is 4.5 times of the total amount from January to November 2021, and the self-developed DRAM enters the accelerated volume period.
DRAM has high technical barriers, concentrated market and monopoly situation. DRAM, namely dynamic random access memory, is the most important system memory in the current market. It occupies a core position in the computing system and is widely used in servers, mobile devices, PCs, consumer electronics and other fields. Due to extremely high technical and financial barriers, the DRAM market is highly concentrated or even monopolized.
The consignment mode cuts into the DRAM market and accumulates rich customer resources. The company began to sell Changxin storage DRAM products on a commission basis in 2020. In June 2021, the company launched its first private brand DRAM, which is mainly aimed at niche markets such as consumer, industrial control and automobile, and is applied to many fields such as set-top box, TV, monitoring, network communication, smart home, tablet computer, on-board audio-visual system and so on.
Facing niche markets such as consumer electronics, DRAM has become a new revenue contribution point. The first 4gbddr4 product mass produced by the company in June 2021 has passed the certification of many mainstream platforms in the field of consumer applications. It is widely used in the fields of set-top box, TV, monitoring, network communication, smart appliances and so on. At the same time, it is also actively expanding its application in the fields of tablet computers, car audio-visual systems and so on. At the same time, the company has won orders and trust from DRAM customers in IPTV, security and consumer fields, laying a solid foundation for follow-up long-term cooperation.
Maintain the advantage of process substitution and continuously reduce the product cost. The company mass produced 19nm, 4gbddr4 in June 2021. DRAM products in the company’s planning include DDR3, DDR4 and lpddr4. The manufacturing process is 1xnm (19nm, 17nm) and the capacity is 1GB ~ 8GB. The company actively develops 17nm DDR3 products. In the niche market, the company’s DRAM products maintain the generation difference advantage in the process, which is conducive to reducing the product cost. The close cooperation between the company and Changxin storage provides a stable capacity guarantee for the company’s DRAM products.
Profit forecast: we expect the net profit attributable to the parent company in 2021, 2022 and 2023 to be RMB 2.222/28.16/3.403 billion respectively, corresponding to 35 / 28 / 23 times of the share price PE on December 1, maintaining the “buy” rating.
Risk tip: the supply and demand pattern of the industry has improved, the product R & D is less than expected, and the customer expansion is less than expected.
