Aojie Technology (688220)
Investment logic
Focus on R & D investment, rich product matrix and entrepreneurial spirit in the management team. The company acquired the R & D Department of Korean alphean, Jiangsu zhiduoxin, Marvell baseband chip and Zhiqing information, plus its own R & D accumulation, and has the R & D and design strength of full-standard (2G / 3G / 4G / 5G) cellular baseband chip and multi protocol non cellular Internet of things chip, with strong scarcity. 24 chips have been sold in large quantities, covering a large number of Internet of things communication and consumer electronics scenes. Including 54 chips under development, and providing chip customization and IP authorization services. 90% of the employees are R & D personnel, and the equity incentive covers a wide range. The founder Dai Baojia has rich successful entrepreneurial experience. The company has experienced many mergers and acquisitions, but the personnel stability is very strong, and the average annual turnover rate is less than 3%.
Cellular baseband has deep barriers, leading performance and significant customer advantages, which is expected to continue to increase market share. The integration and power consumption of the company’s products are better than those of competitors. Relying on the advantages of high cost performance and localized services, the company has entered the supply chain of mainstream IOT module manufacturers such as Quectel Wireless Solutions Co.Ltd(603236) , Fibocom Wireless Inc(300638) , Shenzhen Neoway Technology Co.Ltd(688159) and will benefit from the development of the IOT industry and the substitution trend of localization; 2G / 3G withdrawal further improves the demand of the company’s 4G CAT1 and other advantageous products. The chip design industry has large R & D investment, deep technical barriers and high dependence on talents. The cellular communication chip also needs to follow the 3GPP specification and interconnect with base station suppliers and communication operators. The verification cycle is long. Only six companies in the world have the design ability, and it is difficult to have a latecomer to verify the company’s R & D strength. The Internet of things chip industry is leading. The intelligent terminal chip has completed the technical reserve and is currently mainly used for functional machines. If it enters the smart phone market, it is expected to increase the shipment and unit price simultaneously and provide profitability.
Multi business combination, both offensive and defensive, optimistic about the future growth of the company. The company’s new product R & D, fund-raising and market promotion are progressing smoothly. 5g chips have been released, 33.547 million shares have been listed and issued, and 2.6 billion yuan has been raised for technology R & D and project promotion. WiFi, Bluetooth, Lora and navigation and positioning chips are arranged in an all-round way, covering a variety of communication protocols and rich downstream application scenarios. Self developed IP reduces dependence on third-party IP companies, and chip customization business establishes good cooperation with mobile phone manufacturers such as Xiaomi, oppo and vivo, which is conducive to developing the smart phone market. GSMA predicts that the CAGR of China’s Internet of things industry will be 10% + in the next five years, and the growth rate of large particle scenario will be faster. In the past, the company’s revenue CAGR exceeded 100%. We are optimistic about the future growth of the company. It is expected that the cellular baseband chip will still be the main growth force, and the revenue CAGR will be 50% in the next three years.
Investment advice and valuation
At present, the company is not profitable. We use the PS method for valuation. It is estimated that the revenue from 2021 to 2023 will be RMB 2.138/36.07/5.009 billion respectively, corresponding to 13.3/8.9/6.3 times of PS. Select Maxscend Microelectronics Company Limited(300782) , Sg Micro Corp(300661) , Montage Technology Co.Ltd(688008) , Espressif Systems (Shanghai) Co.Ltd(688018) , 3Peak Incorporated(688536) , Cambricon Technologies Corporation Limited(688256) as comparable companies. The company was given a 12 times valuation in 2023, with a target price of 143.7 yuan. The company was given a “buy” rating for the first time.
Risk
Downstream demand and R & D are less than expected, competition intensifies, exchange rate fluctuations, supply chain risks, and shareholders lift the ban.
