Weijie Chuangxin (688153)
Weijie Chuangxin is an integrated circuit design enterprise focusing on the R & D, design and sales of RF front-end chips. It mainly provides customers with RF power amplifier module products. Gaintech, the largest shareholder, is a wholly-owned subsidiary of MediaTek, holding 25.31% of the shares. In the subdivided field of RF power amplifier discrete devices and module products, the company closely follows the latest development of communication technology and has strong technical strength and competitive advantage. In 2021, the company shipped more than 1.2 billion 4G RF power amplifier modules, ranking first among Chinese manufacturers, and more than 100 million 5g RF power amplifier modules. Optimistic about 1) the volume and price of RF front-end chips brought by 5g business rise at the same time; 2) The company’s technology + R & D has jointly built a core moat, bringing first mover advantages to the industry. 3) the product structure has been continuously optimized, the proportion of 5g PA modules has increased, and the profitability has been improved. 4) the strategic barriers of key customers have been built, helping the continuous and large-scale sales
Market space measurement of smart phone RF front-end: 5g drives significant market increment, and Weijie Chuangxin has the first mover advantage. The cost of RF devices in 3G / 4G / 5G smart phones is split. According to the statistics of Zhiyan consulting, the RF front-end cost of a single 5g smart phone is up to $34, and the cost of a single flagship 4G LTE smart phone is $19. In terms of other smart phones, we expect the cost to be about US $8.7 per unit, of which the value and proportion of 5g have increased significantly. The company has shipped more than 100 million 5g RF power amplifier modules.
Technology + R & D jointly build a core moat, and the incentive measures for R & D personnel are highly covered. The company’s core technology leads the market. After the development of communication technology and many years of R & D investment and product iteration, the integration of PA module has been continuously improved. At present, it has developed into PA module products with integration in mmmb PA and TXM. In addition, the company has achieved mass production and sales in highly integrated l-pamif and other products. The proportion of R & D investment has increased, and the company’s core competitiveness has been continuously improved. High coverage of R & D personnel incentive measures to ensure the enthusiasm and stability of R & D personnel.
The proportion of 5g PA module continues to increase, and the superposition of first mover advantages promotes the continuous optimization of the company’s profitability. The gross profit margin of the company continues to rise, and it is expected that the net profit will turn from loss to profit in 2022q1. The company’s 5g highly integrated PA module was launched earlier and its products have strong market competitiveness. Benefiting from the deepening of 5g business process, the downstream market has a strong demand for 5g RF front-end chips, with a gross profit margin of 40.10% in 2021h1 (only 21.55% in 4G), and the gross profit margin of 5g PA module is significantly higher than that of 4G PA module. Optimistic about the company, with the continuous improvement of the proportion of 5g PA module sales revenue, the profitability of the company continues to rise.
The strategic barriers of key customers are high, deeply bound, and have passed the certification of well-known mobile terminal customers at home and abroad, contributing to the continuous and large-scale sales. Leading technology + products help the company obtain stable and high-quality customers. At the same time, it has passed the certification of well-known mobile terminal customers at home and abroad and opened the mode of in-depth cooperation. The company’s downstream customers mainly include mainstream mobile phone brand manufacturers such as Xiaomi, oppo and vivo, as well as well-known mobile terminal equipment ODM manufacturers in the industry such as Huaqin communication, Longqi technology and Wingtech Technology Co.Ltd(600745) etc. The cooperation between the company’s products and head customers continues to deepen, 5g products have been reliably verified earlier, and the purchase demand of head brand customers for the company’s products continues to rise. They are optimistic about the continuous and large-scale sales of the company.
Investment suggestion: we expect that the operating revenue of Weijie Chuangxin in 2022, 2023 and 2024 will reach RMB 4.640/57.70/7.181 billion respectively, and the net profit will be RMB 525/7.10/872 million. In terms of comparable companies, the average PS in 2022 was 5.63 times. Combined with the company’s leading position in the RF front-end market, we gave 6.6 times PS, corresponding to the share price of 76.54 yuan. We gave a “buy” rating for the first time, and were optimistic about the company’s long-term development momentum.
Risk tips: product upgrading iteration, the implementation progress effect of fund-raising investment projects fails to meet expectations, the customer concentration is high, the risk of stock price fluctuation in the short term, the gross profit margin is relatively low, does not have the complete ability of 5g high integration RF front-end architecture scheme, faces the risk of higher technical challenges in the process of 4G to 5g iteration, and the risk of horizontal competition and conflict of interest between MediaTek or its controlled enterprises and the company
