This week, the CSI 300 rose 0.39%, and the gem rose 0.78%, of which the communication sector rose 1.67%, and the price performance of the sector was weaker than the market; The turnover rate of 125 constituent stocks of the communication (CITIC) index this week was 1.56%; In the same period, the turnover rate of 300 constituent stocks in Shanghai and Shenzhen was 0.44%, and the overall activity of the sector was stronger than that of the market.
In terms of individual stocks in the communications sector, the top five companies this week were: Beijing Jiaxun Feihong Electrical Co.Ltd(300213) (25.64%), Hangzhou Huaxing Chuangye Communication Technology Co.Ltd(300025) (20.53%), Raisecom Technology Co.Ltd(603803) (20.36%), Hangzhou Anysoft Information Technology Co.Ltd(300571) (9.89%) and Suzhou Tfc Optical Communication Co.Ltd(300394) (9.52%); The top five companies with declines are: Qingdao Topscomm Communication Inc(603421) (- 9.37%), Avit.Ltd(300264) (- 8.69%), Shenzhen Sed Industry Co.Ltd(000032) (- 7.25%), Yangtze Optical Fibre And Cable Joint Stock Limited Company(601869) (- 6.11%) and Wingtech Technology Co.Ltd(600745) (- 5.61%).
The IPO of China’s leading switching chip company Shengke communication technology innovation board was accepted. Founded in 2005, Suzhou Shengke communication is one of the first companies to participate in the R & D and design of Ethernet switching chips in China. Its main business includes the R & D, design and sales of Ethernet switching chips and supporting products. Ethernet switching chip is the core platform chip for building enterprise network, operator network, data center network and industrial network, which directly affects the performance of the switch. The company now has a rich product series of Ethernet switching chips and modules, including Tsingma MX, goldengat, Tsingma, duet2, greatbelt and Humber series products can meet different Ethernet switching needs from access layer to core layer. At the same time, the company launched Mars series Ethernet transceiver chip (PHY) supporting Ethernet switching chip to enhance the comprehensive competitiveness of products. In addition to switching chips and modules, the company expands to downstream switch terminals, provides customers with switch OEM customization services, and fully integrates the company’s self-developed software system. The sales concentration of the company’s customers is high. The proportion of the top five customers in 2018-2021h1 is 47.30%, 47.21%, 56.65% and 66.86% respectively, mainly Chinese customers, and the sales proportion of domestic customers is maintained at about 85% all year round. The company adopts fabless mode, and the OEM includes Marvell, creative Electronics (TSMC Electronics) and other global leading enterprises, and has formed a stable and good cooperative relationship.
With the rapid growth of revenue scale, it is planned to raise 1 billion yuan for new product R & D and mass production. The company’s revenue scale grew rapidly. From 2018 to 2021h1, the company achieved revenue of 128 million yuan / 192 million yuan / 264 million yuan / 199 million yuan respectively, with growth rates of 49.5% and 37.6% in 2019 / 2020,. The gross profit margin of 2018-2021h1 products is 58.95% / 58.05% / 46.98% / 47.95% respectively. The gross profit margin fluctuates greatly in 2020, which is mainly affected by the increase in the proportion of low gross profit chip sales. From 2018 to 2021h1, the R & D investment was 70 million yuan / 95 million yuan / 111 million yuan / 79 million yuan respectively, accounting for 54.27% / 49.79% / 41.97% / 39.66% of the current revenue, and the net profit deducted from non parent company was – 43 million yuan / – 35 million yuan / – 41 million yuan / – 12 million yuan respectively. The IPO of the company plans to raise 1 billion yuan, of which 470 million yuan is planned to be invested in the R & D and mass production project of new generation network switching chip, 250 million yuan is planned to be used in the R & D project of routing switching integration network chip, and the remaining funds are used for replenishment. The new generation of network switching chips is mainly through iterative upgrading of existing products, R & D and innovation of switching chips with stronger performance and lower power consumption, so as to further narrow the gap in switching capacity with industry-leading enterprises. The routing and switching integrated network chip project mainly adopts the chip architecture combining routing and switching, and develops routing and switching chips with large cache and large table item routing capabilities, forming a new product sequence and enhancing the overall competitive strength of the company.
The scale of the exchange chip market is about 40 billion, and there is a broad space for independent and controllable substitution. The scale of the global switching chip market has grown steadily. According to the data of insight consulting, the overall market scale of the global Ethernet switching chip was 31.85 billion yuan in 2016 and 36.8 billion yuan in 2020, with an average annual compound growth rate of 3.6% from 2016 to 2020. It is expected that the global Ethernet switching chip market will reach 43.4 billion yuan by 2025 and an average annual compound growth rate of 3.4% from 2020 to 2025. Ethernet switching chips are divided into commercial and self use, of which commercial and self use account for half respectively. Cisco and Huawei are the main manufacturers of Ethernet switching chips in the world, and their self-developed chips are used for self-produced switches and sold abroad. The global commercial manufacturers of Ethernet switching chips mainly include Broadcom, Meiman, Ruiyu, NVIDIA, Intel, Shengke communication, etc. According to the data of insight consulting, in 2020, according to the sales statistics of China’s commercial Ethernet switching chip market, the top three suppliers with market share accounted for 97.8% of the market share. Among them, Broadcom, Meiman and Ruiyu ranked among the top three with market share of 61.7%, 20.0% and 16.1% respectively, and Shengke communication, a domestic manufacturer, ranked fourth in sales, accounting for only 1.6% of the market share. The company’s product performance accelerated to catch up, including Tsingma MX series ctc8180 has reached the global advanced level in terms of switching capacity, port rate and other indicators, and many products have entered the supply chain of China’s mainstream network equipment manufacturers. In the future, with the policy environment and the embodiment of local advantages, there will be a broad space for potential domestic substitution.
Investment suggestion: equipment supplier: Unisplendour Corporation Limited(000938) (Xinhua III), Zte Corporation(000063) , Fujian Star-Net Communication Co.Ltd(002396) ; Data center: Shanghai Baosight Software Co.Ltd(600845) , Kehua Data Co.Ltd(002335) , Beijing Sinnet Technology Co.Ltd(300383) etc; Pay attention to the Internet of things and the Internet of vehicles: Quectel Wireless Solutions Co.Ltd(603236) , Fibocom Wireless Inc(300638) , Meig Smart Technology Co.Ltd(002881) , Wingtech Technology Co.Ltd(600745) , Wenzhou Yihua Connector Co.Ltd(002897) , Foryou Corporation(002906) , Queclink Wireless Solutions Co.Ltd(300590) , Hangzhou Hopechart Iot Technology Co.Ltd(688288) , Streamax Technology Co.Ltd(002970) ; IDC HVAC equipment: Shenzhen Envicool Technology Co.Ltd(002837) , Nanjing Canatal Data-Centre Environmental Tech Co.Ltd(603912) , Yimikang Tech.Group.Co.Ltd(300249) etc; Telecom operators: China Mobile, China Telecom Corporation Limited(601728) , China United Network Communications Limited(600050) ; On board connector: Suzhou Recodeal Interconnect System Co.Ltd(688800) , Wenzhou Yihua Connector Co.Ltd(002897) ; Intelligent controller: Shenzhen Topband Co.Ltd(002139) , Shenzhen H&T Intelligent Control Co.Ltd(002402) , Shenzhen Longood Intelligent Electric Co.Ltd(300543) , Shenzhen Bestek Technology Co.Ltd(300822) ; Optical devices and optical modules: Eoptolink Technology Inc.Ltd(300502) , Suzhou Tfc Optical Communication Co.Ltd(300394) , Accelink Technologies Co.Ltd(002281) ; Military communications and satellite applications: Tianjin 712 Communication & Broadcasting Co.Ltd(603712) , Jushri Technologies Inc(300762) , Shanghai Huace Navigation Technology Ltd(300627) , Chengdu Corpro Technology Co.Ltd(300101) , Guangzhou Haige Communications Group Incorporated Company(002465) , China Satellite Communications Co.Ltd(601698) etc.
Risk warning events: 5g investment is less than expected, market competition intensifies, overseas trade disputes, market systemic risks, etc
