Dongxin Co., Ltd. (688110)
The storage industry has a broad market, and the rise of emerging industries brings opportunities
Memory chip is the largest segment in the whole integrated circuit market, accounting for 35.05% in 2021. With the rise of emerging fields such as automotive electronics, 5g communication, Internet of things and wearable, memory chips will play a more important role in the whole industrial chain. According to IC insights, from 2021 to 2023, the global market scale of memory chips will reach US $155.2 billion, US $180.4 billion and US $219.6 billion respectively, with an increase of 22.5%, 16.2% and 21.7% respectively. In the Chinese market, the World Semiconductor Trade Statistics Association predicts that the scale of China’s memory chip market will reach 649.2 billion yuan in 2023. Judging from the competition pattern, the global storage chip market is monopolized by overseas enterprises and has a high head concentration. But the whole market is differentiated. There are different opportunities for development in the small capacity storage market. The current small and medium capacity chip suppliers are mainly Chinese and Taiwan manufacturers, including China, Hong Wang, Wang Hong, Gigadevice Semiconductor (Beijing) Inc(603986) and Dongxin shares. Huabang electronics and wanghong electronics occupy a high market share. In the future, with the continuous improvement of localization demand, mainland enterprises are expected to usher in a good development opportunity.
Focus on the small and medium-sized capacity market and have clear independent intellectual property rights
East core share was founded in 2014, focusing on the design, production and sales of small capacity NAND, NOR flash memory chips, DRAM memory and MCP. It is one of the few Chinese mainland companies that can simultaneously provide NAND Flash, NORFlash and DRAM products and compete directly in the medium and small capacity flash chip market with the well-known global companies and break through the monopoly of overseas technology. The company’s core technologies come from independent research and development, including 6 NAND flash related technologies, 2 norflash related technologies and 1 DRAM related technology. The product process is leading in China. In terms of supply chain, the company has established stable cooperative relations with Semiconductor Manufacturing International Corporation(688981) , Li Jidian and other well-known wafer foundry manufacturers, as well as Ziguang Hongmao, China Resources AXA, Nanmao technology, atsemiconductor and other well-known packaging and testing plants at home and abroad. In terms of downstream customers, the company’s products have not only been certified by many well-known platform manufacturers such as Qualcomm, Broadcom, MediaTek, Ziguang zhanrui, ZTE, Rockchip Electronics Co.Ltd(603893) , Ingenic Semiconductor Co.Ltd(300223) , Bestechnic (Shanghai) Co.Ltd(688608) , but also entered the supply chain system of well-known customers at home and abroad such as Samsung Electronics, Hangzhou Hikvision Digital Technology Co.Ltd(002415) , Zhejiang Dahua Technology Co.Ltd(002236) , Goertek Inc(002241) , Shenzhen Transsion Holdings Co.Ltd(688036) , Zte Corporation(000063) , huierfeng, etc., and are expected to gradually increase in volume in the future. In the first three quarters of 2021, the company achieved an operating revenue of RMB 785 million, a year-on-year increase of 32.75%, and a net profit attributable to the parent company of RMB 168 million, a year-on-year increase of 92.357. At the same time, its profitability continued to improve, with a gross profit margin of 38.59%, a record high and a net profit margin of 23.29%.
High level products such as layout 1xnm and vehicle specification level bring long-term growth
Raised 750 million yuan to layout four major projects: 1xnm flash memory product R & D and industrialization project, vehicle specification flash memory product R & D and industrialization project, R & D center construction project and supplementary working capital. The 1xnm flash memory project is developed by the company in cooperation with Semiconductor Manufacturing International Corporation(688981) and aims to make further breakthroughs in China’s advanced memory chip manufacturing technology, so as to open space for designing products with higher capacity and cost advantage in the future and accelerate the realization of domestic substitution. The vehicle specification level storage project is that the company complies with the layout of intelligent networking function in the automotive industry and vigorously develops high value-added vehicle specification level storage chips with higher requirements than traditional consumer electronics storage chips in terms of process technology, use environment, anti vibration ability and reliability, so as to enhance competitiveness. In addition, the company’s R & D center projects include the research and development of forward-looking products such as integrated memory and computing chips and dtrnand, which aims to expand the company’s product series from general-purpose chips to characteristic performance products. In the future, high-tech barrier products are expected to achieve higher unit price positioning, optimize the company’s product structure, improve the profit center, and establish competitive advantages for long-term development.
Profit forecast
It is predicted that the company’s revenue from 2021 to 2023 will be RMB 1.171 billion, RMB 1.544 billion and RMB 2.086 billion respectively, EPS (not considering the over raised funds for other purposes) will be RMB 0.55, RMB 0.76 and RMB 0.99 respectively, and the corresponding PE of the current stock price will be 82, 60 and 46 times respectively, giving the “recommended” investment rating.
Risk statement
Downward risk of product price cycle in storage industry; Risk that the product iteration is less than expected due to technology upgrading; The market scale is small, and the market share has the risk of further reducing; The cost does not have the scale advantage risk; International trade friction risk; Risks that the progress of the raised investment project does not meet the expectations, etc.
