\u3000\u3 Shengda Resources Co.Ltd(000603) 893 Rockchip Electronics Co.Ltd(603893) )
Event:
The company released its annual report for 2021, with an operating revenue of 2.72 billion yuan, a year-on-year increase of 45.90%; The net profit attributable to the parent company was 600 million yuan, a year-on-year increase of 88.07%; Net profit deducted from non parent company was 446 million yuan, with a year-on-year increase of 63.91%. The company’s 4q21 operating revenue was 662 million yuan, a year-on-year increase of 3.71%; The net profit attributable to the parent company was 194 million yuan, a year-on-year increase of 47.74%; Net profit deducted from non parent company was 101 million yuan, a year-on-year decrease of 3.16%.
Comments:
The overall performance is bright, and the tight production capacity affects the profitability: the company’s operating revenue has achieved a compound annual growth of 29% in the three years from 2019 to 2021, and the company’s net profit has achieved a compound annual growth of 46% in the same period.
The company achieved excellent performance in 2021, but the continuous shortage of wafer production capacity throughout the year also limited the growth rate of the company’s performance. A major supplier of the company can only provide 70% of the average production capacity of the past three years in 2021, affecting the profitability of the company. Some of the company’s main products can only meet 50% of customer orders, which is seriously in short supply. The strong demand for wafer OEM also led to the rise of OEM prices, while the increase of the company’s products was rational, maintaining a gross profit margin of about 40%, so as to ensure a benign customer ecological relationship of long-term cooperation and win-win results.
The company expects that the tight production capacity will be relieved in 2022. At the same time, the company will make balanced planning and layout of main processes such as 22nm, 14nm / 12NM and 8nm / 7Nm, the impact of production capacity will be gradually eliminated, the profitability will be restored, and the performance is expected to continue to grow at a high speed.
Control the core computing power, and the high-end flagship chip will be available soon: rk3588 has been successfully streamed in the first half of 2021. The chip adopts advanced fin FET process, eight core architecture of arm quad core A76 and quad core A55, mali-g610 quad core GPU and self-developed 6T computing power NPU. It is the performance benchmark of domestic SOC, demonstrating the company’s leading technical strength. 2022 is the year of mass production of rk3588 series products. At present, it is rapidly promoted in eight directions: arm PC, tablet, high-end camera, NVR, 8K and large screen equipment, automotive intelligent cockpit, cloud service and edge computing, AR / VR, etc. coupled with the upgrading demand of the original rk3288, rk3399 and other products, it is expected to inject new growth momentum into the company.
Optimize the revenue structure and form the scale of aiot product matrix: the company’s intelligent application processor chip business has developed rapidly. In 2021, the proportion of operating revenue was 83.74%, with a year-on-year increase of 47.03%. Among them, the proportion of intelligent application processor chip with built-in NPU was 20.64%, with a year-on-year increase of 137573%.
Focusing on the product line of “big audio, big video, big perception and big software”, the company has continuously deepened and extended the life cycle of stock products, and entered the application of to B industry. The visible cycle is as long as 8-10 years, and the annual increment is expected to reach 20%; Incremental products such as machine vision chip rv1126 and intelligent processor rk3568 contributed 20% of the annual revenue, and the proportion will continue to increase in the future; Rk3588, which is about to be mass produced and shipped, is actively introduced into customers and is expected to accelerate performance growth.
In the field of vehicle gauge chips, rk3558m has passed aec-q100 certification, and rk3568 and rk3588 are also under test and certification, which is expected to make a breakthrough in the field of high-performance intelligent cockpit. At present, the company has formed high, medium and low-grade vehicle processor solutions with different performance, covering applications in passenger cars, commercial vehicles and other fields. The company will also deploy more kinds of on-board chips, such as vehicle audio chips and interface chips, which are already under research and development. In the future, it is expected to further enrich the company’s on-board processor series products.
Continuous R & D investment, adhere to self-research and challenge core technology: the company recognizes that the competition in the semiconductor industry is the competition of supply chain, talent and technological innovation, and strives for the top. Over the years, it has continuously maintained R & D investment accounting for about 20% of revenue, and the high-end aiot chip technology is firmly in the leading position in China.
The flagship chip rk3588 is one of the first chips to realize true 8K encoder and true 8K decoder (8K 60Hz) at the same time outside China. All its IP is upgraded from 4K to 8K, meeting the bandwidth and power consumption requirements of the full link 8K SOC architecture. At the same time, rk3588 challenges the physical design of 10 physical power domains, 90 logical power domains and more than 130 modules, and completes lp5-5500mbps and HDMI@12Gbps Hybrid simulation and packaging design of equal high speed interface.
During the reporting period, the company continued to research and develop basic core IP, especially in NPU, ISP, high-performance video codec, video post-processing and other directions. The company’s third-generation ISP and fourth-generation NPU have been developed and applied to relevant chips. In addition, according to the feedback of practical application products, the company continues to expand the type of NPU support network, connect with various AI customers, and gradually form a perfect embedded artificial intelligence technology link and application ecology.
As of December 31, 2021, the company has applied for 975 patents (including 925 invention patents, 36 utility model patents and 14 design patents), 39 layout design rights and 232 software copyrights, and has been authorized 549 patents (including 526 invention patents, 12 utility model patents and 11 design patents), 24 layout design rights and 230 software copyrights.
Profit forecast, valuation and rating: we are optimistic about the long-term development space of the company’s rk3588 new product volume and aiot chip platform, and maintain the revenue forecast in 2022 and 2023. At the same time, considering the shortage of wafer capacity and the price rise of upstream OEM, we adjusted the company’s net profit attributable to the parent company from 2022 to 2023 to 9.18 (down 13.0%) and 1.219 (down 6.5%) billion yuan. We estimate that the company’s revenue from 2022 to 2024 will be 44.40/54.13/6.599 billion yuan respectively, and the net profit attributable to the parent company will be 918/12.19/1.361 billion yuan respectively. The current market value corresponding to PE is 45 / 34 / 30 times respectively, maintaining the “buy” rating of the company.
Risk tip: the capacity increase is less than expected; Downstream demand is lower than expected; The mass production of new products was less than expected.
