Dongxin Co., Ltd. (688110)
1. The company started with SLC NAND, acquired fidelix of South Korea in 2015 and integrated its storage chip technology and Management R & D team. At present, the company has formed a complete storage product line of NAND + nor + DRAM. In 2021, the company achieved a revenue of 1.14 billion yuan, a year-on-year increase of 45.2%, a compound growth rate of 30.7% in recent three years, a net profit attributable to the parent company of 262 million yuan, a year-on-year increase of 1240.8%, a turnaround in 2020 and a significant increase in 2021.
2. Local SLC NAND leader, 5g base station and automotive electronics bring new increment. SLC NAND is mainly used in fields with high reliability requirements, such as 5g communication equipment, automotive electronics, security, wearable, etc. the global market scale will reach US $2.1 billion in 2021, with a compound growth rate of 6% in the next three years. SLC NAND has a market share of 3%, which is the leader in China. The most advanced products are 24nm8gb products, 19nm high-capacity products are about to be mass produced, the process iteration is leading in China, and the cost advantage is significant. The reliability of the company’s products has gradually moved from industrial level to vehicle specification level. It has covered most head customers in the fields of Netcom, security, wearable, mobile terminal, industrial control, communication module and so on, and is developing vehicle specification level products. Before IPO, the company obtained shares from Huawei Hubble, national fund and Saic Motor Corporation Limited(600104) strategy. In the future, it is expected to break through to the high-end market and open up growth space with the help of shareholders and industrial chain resources.
3. Lay out nor flash, DRAM and MCP to build a medium and small capacity storage platform. In 2020, niche DRAM and norflash markets will be US $8.4 billion and US $3.1 billion respectively. In the future, 5g applications, wearable, display screen, Internet of things and other applications will still drive the continuous expansion of their market scale. In terms of DRAM, the company’s DRAM and MCP products have been iterated to DDR3 and have passed the certification of 4G module platforms of Ziguang zhanrui, Zoje technology and MediaTek. Customers include LG, Renesas, Tcl Technology Group Corporation(000100) and other customers. The new product lpddr4x is under development and is expected to contribute revenue in the past two years. As for norflash, the company’s product capacity covers 2MB ~ 256MB and adopts 48nm leading technology. Its customers include Samsung Electronics, LG, Shenzhen Transsion Holdings Co.Ltd(688036) , Goertek Inc(002241) etc. the company is developing 512MB, 1GB and other high-capacity products and making layout to the industrial and vehicle regulatory markets.
4. Profit forecast: the company is the core target of local small and medium-sized NAND, with scarcity, high growth and excellent quality. It is estimated that the revenue from 2021 to 2023 will be 1.139 billion yuan, 1.601 billion yuan and 2.127 billion yuan respectively, with a year-on-year increase of 45.3%, 40.5% and 32.9%; The net profit attributable to the parent company was 261 million yuan, 352 million yuan and 441 million yuan respectively, with a year-on-year increase of 1234.5%, 35.0% and 25.4%. The PE corresponding to the current market value was 69 times, 51 times and 41 times respectively. For the first time, give a “buy” rating.
5. Catalytic factors of stock price: the price rise of 3D NAND is transmitted to 2D NAND; DDR3 price increase; New product volume (19nm NAND, vehicle specification products, high-capacity nor, lpddr4x).
6. Risk warning: downstream demand for communication and consumption is less than expected; Memory chip falling price risk; Wafer foundry price rise risk; The R & D and volume of new products are less than expected; Customer concentration risk; Supplier concentration risk.
