\u3000\u3 Shengda Resources Co.Ltd(000603) 893 Rockchip Electronics Co.Ltd(603893) )
Events
Rockchip Electronics Co.Ltd(603893) released the annual performance report for 2021: the company achieved an operating revenue of 2.719 billion yuan in 2021, with a year-on-year increase of 45.90%, a net profit attributable to the parent company of 602 million yuan, with a year-on-year increase of 88.07%, and a net profit attributable to the parent company of 446 million yuan after deduction, with a year-on-year increase of 63.91%.
Key investment points
Performance growth was hampered, the annual capacity supply was insufficient, and the ability to control the cost rate was improved
The rapid growth of demand is limited by the structural shortage of the supply chain. A major supplier of the company only provided about 70% of the average production capacity in 2018, 2019 and 2020 in 2021, resulting in the annual supply of some main products of the company meeting less than half of the demand, limiting the growth of revenue.
In terms of product segments, in 2021, the revenue of intelligent application processor chips increased by 47.03% year-on-year, and the sales proportion reached 83.74%. Among them, the proportion of intelligent application processor chips with built-in NPU was 20.64%, and the revenue increased by 137573% year-on-year; The operating revenue of power management chips and other chips increased by 43.37% year-on-year, and the sales accounted for 14.33%; In terms of gross profit margin, the company did not raise prices excessively due to short-term profits in 2021. The overall gross profit margin was 40%, which remained stable in recent four years; In terms of period expenses, the company’s control ability has been greatly improved. During 2021, the expense rate (excluding R & D) is 4.19% (year-on-year -2.84pct), including sales expense rate of 1.86% (year-on-year -0.44pct), management expense rate of 3.33% (year-on-year -0.93pct) and financial expense rate of – 1% (year-on-year -1.47pct). In addition, in 2021, the company’s R & D expense was 560 million yuan (year-on-year + 49.03%), and the R & D expense rate reached 20.63%.
Application processor and power management chips complement each other, and work together with high-quality customers to enable all industries
The company is a leading aiot chip design company in China. Focusing on the overall technical direction of “big audio, big video, big perception and big software”, the company has rich experience and technical reserves in the development of high-performance chip design, image signal processing, HD video codec, artificial intelligence and system software, and has formed a multi-level, multi platform and multi scene professional solution.
Application processor complements chips such as power management: the company is deeply engaged in the field of application processor. The successful mass production of flagship chip rk3588 means that the company’s aiot building is basically formed and the high, medium and low-end SOC product lines are complete. At the same time, the company continues to expand the use of peripheral products including power management chip, fast charging protocol chip, multimedia interface and wireless chip.
The proportion of high-end products is expected to continue to increase: chips of more than $10 will account for about 40% of the company’s revenue in 2021. With the launch of the company’s flagship rk3588, which can make up for the blank of China’s high-performance general-purpose processor, it is expected that this proportion will increase significantly in the future.
Jointly build ecology and enable all industries: the company’s products have a wide range of applications, including smart business display, smart financial retail, machine vision, education and office equipment, cloud computing and cloud terminals, automotive electronics, smart industrial equipment, UAV, video conference system, etc. Consumer electronics covers sweeping Siasun Robot&Automation Co.Ltd(300024) , dictionary pen, smart speaker, smart home appliances, tablet computers, TV boxes, etc.
Win win cooperation and high-quality customer resources: in the field of intelligent IOT, the company’s cooperative customers include LG, Fujian Star-Net Communication Co.Ltd(002396) , Yilian, Tencent, Ali, shangmi, video source, meituan, Yushi, Advantech, Lenovo, etc. In the field of consumer electronics, customers include Sony, ASUS, oppo, Baidu, Ecovacs Robotics Co.Ltd(603486) , Netease, Xiaomi, Better Life Commercial Chain Share Co.Ltd(002251) , Midea, Skyworth and other well-known Chinese consumer electronics brands.
Demand growth is superimposed on supply easing, and the long-term direction is clear and ready to go
In terms of demand, according to IDC’s data and forecast, the global aiot market will reach US $226.4 billion in 2019 and is expected to reach US $482 billion by 2022, with a compound growth rate of 28.65%. In terms of supply, the tight supply of mature process capacity of 28nm and above may last until the second half of 2023, but for the company, the supply of mature processes in 2022 will be greatly alleviated compared with that in 2021.
In the future, the company will focus on the following business directions:
Machine vision: actively explore the machine vision market including various security, access control, smart home and other applications, and have achieved certain customer base and sales performance. Rv1109 / rv1126 launched in 2020 and rk3588 launched in 2021 have been affirmed by the industry’s leading customers. At the same time, start the research and development of a new generation of intelligent vision processor project, which is positioned at the mainstream track with the largest scale of machine vision. In the future, it is expected to form a complete range of vision processor series through the high-low combination of multiple products, so as to form more competitive solutions in smart home, intelligent hardware and machine vision.
Intelligent IOT: ① accelerate the market layout of on-board products. At present, vehicle processor solutions with high, medium and low grades and different performance covering passenger cars and commercial vehicles have been formed, which have been applied in DMS and DVR. Rk3358m, the first chip to pass aecq100, will be launched in 2021. Meanwhile, rk3568m will complete aec-q100 test in the first half of 2022. In the future, rk3588 for high-performance intelligent cockpit will also enter the field of automotive electronics. In addition, the company will further expand its vehicle product line, such as vehicle audio chip and interface chip, which are already under research and development. ② Cooperate with ecological partners to jointly explore the application of medium and high-end products in education, office, energy, cloud services, industry, medical treatment and other fields.
Consumer electronics: continue to make efforts in flat panel, TV box, education electronics, smart home and other industries, fully combine the company’s advantages in aiot products and medium and high-end products, and further expand the market and customer base.
In addition, the company will vigorously promote peripheral chip products. On the one hand, it will form a reasonable matching with the company’s existing processors, on the other hand, it will actively expand customers and look for market opportunities. At present, the company has also launched an active layout in the technical direction of digital analog hybrid design, RF technology, photoelectric conversion and other product fields such as interface expansion chip, wireless connection chip, low-power MCU chip, wearable chip and module design, and has successively formed new product lines.
Profit forecast
It is predicted that the company’s revenue from 2022 to 2024 will be 4.319 billion yuan, 5.728 billion yuan and 6.865 billion yuan respectively, and the EPS will be 2.20, 2.98 and 3.50 yuan respectively. The corresponding PE of the current stock price will be 46, 34 and 29 times respectively, giving the “recommended” investment rating.
Risk tips
Downside risk of industry prosperity, risk of product R & D progress falling short of expectations, risk of intensified industry competition, risk of overseas policy changes, etc.
