\u3000\u3000 Wuxi Chipown Micro-Electronics Limited(688508) (688508)
Performance review
On January 10, the company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company will reach 190 million yuan in 2021, with a year-on-year increase of 90.5%; It is expected to realize a net profit of 140 million yuan, a year-on-year increase of 73.6%.
Business analysis
The rise of foundry costs in the fourth quarter caused fluctuations in quarterly non deduction performance, and did not change the long-term profit improvement trend: the company realized a non deduction net profit of 29 million yuan in the fourth quarter, down 39% month on month in the third quarter. We believe that it is mainly due to the rise of wafer foundry costs in the fourth quarter, and the increase of product price has been reflected in the third quarter, resulting in a decline in non deduction profit month on month. Looking forward to 2022, with the large volume of large household appliance power management chips with high gross profit margin, fast charging chips for brand customers and industrial control products, we expect the company’s gross profit margin to continue to increase in 2022. Overall, we believe that the company’s strategy is to develop customers, so the price remains relatively stable. The increase of gross profit margin mainly depends on the upgrading of product structure rather than pure price rise. The sharp fluctuation of gross profit margin in a single quarter is mainly caused by the mismatch of cost changes and price changes caused by cost transfer. The year-end bonus, equity incentive fee and other factors are also expected to affect the seasonal fluctuation of deduction non performance.
With high demand and deterministic growth, production capacity is still the main constraint: the growth of the company’s revenue mainly benefits from the continuous improvement of the market share of products in small household appliances and the development of new customers in large household appliances market. It is expected to break through brand mobile phone customers in the fast-growing Mobile phone charging market, and the continuous volume of industrial control products with high gross profit margin. We expect that the growth of the company’s product demand is highly certain from 2022 to 2023, and the limiting factor is still the insufficient foundry capacity. We expect this factor to be alleviated in 2023.
Investment advice
Due to the high uncertainty of demand growth, we raised the company’s profit forecast from 2021 to 2023 to 190 million yuan (up 9%), 270 million yuan (up 6%) and 360 million yuan (up 7%), maintaining the “buy” rating.
Risk tips
Risk of insufficient foundry capacity; Risk that customer expansion is less than expected; Risk of increased competition
