Gigadevice Semiconductor (Beijing) Inc(603986) (603986)
Event: on November 30, Gigadevice Semiconductor (Beijing) Inc(603986) issued an announcement on the estimated amount of daily connected transactions in 2022. The company expects to purchase and sell DRAM products from Changxin storage for 1.08 billion yuan in 2022, and self-developed DRAM purchased and OEM from Changxin storage for 860 million yuan.
comment:
The self-developed DRAM accelerates the volume, and we expect to contribute revenue of RMB 1.65 billion in 2022. The company’s self-developed DRAM chip has been mass produced in June this year. The self-developed product has realized the comprehensive localization from design, streaming, sealing, testing and verification, has been applied in the consumer field and has passed the certification of many mainstream platforms. In 2022, the company will continue to launch new DRAM self-developed products. It is estimated that the amount of self-developed DDR3 and DDR4 purchased from Changxin storage is 860 million yuan, a year-on-year increase of 355%. With reference to the gross profit margin of DRAM chip of Beijing Sicheng about 35% and the OEM cost accounting for about 80% of the chip cost, it is expected to contribute revenue of 1.65 billion yuan. The company expects to sell DRAM in 2022, with a purchase amount of 1.08 billion yuan, a year-on-year increase of 6%. In the future, the company will focus on self-developed DRAM chips, the proportion of consignment DRAM chips will gradually decline, and the profit of DRAM chips is expected to increase significantly.
The price of niche DRAM is relatively stable and the market demand is still strong. The current DRAM contract price decline is coming to an end in the short term, and the subsequent price decline space is very limited. Some DRAM manufacturers have finished destocking. We expect that the price decline of Q1 DRAM in 2022 is expected to be less than the market expectation, and the price of 3q22 is expected to rebound. The DRAM chip of the company is mainly oriented to niche markets such as TV, set-top box, monitoring and network communication. The demand of the niche market continues to be strong and the price is relatively more stable. In addition, the company also plans vehicle specification DRAM chips. According to the company’s expectation, the 17nm process will be used, and the product line will be continuously enriched, boosting the steady growth of performance.
With the accelerated volume of self-developed DRAM, the company adds strong growth momentum, and the position of China’s leading memory chip manufacturer is becoming more and more stable. The four product lines of MCU + NOR Flash + DRAM + sensor keep pace, and the performance next year is worth looking forward to.
Profit forecast and investment rating: we estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 23.3/32.3/4.1 billion respectively, and the PE valuation corresponding to the closing price (RMB 169.79 / share) on December 2 will be 49 / 35 / 28 times respectively. Maintain the “buy” rating.
Risk factors: increased market competition; Upstream price rise risk; Downstream demand slowdown risk.
