\u3000\u3 China Vanke Co.Ltd(000002) 049 Unigroup Guoxin Microelectronics Co.Ltd(002049) )
Event: the company released its 2021 annual report, realizing revenue (RMB 5.342 billion, + 63.35%) and net profit attributable to the parent company (RMB 1.954 billion, + 142.28%).
Special integrated circuits have maintained rapid growth, and intelligent security chips are expected to bring new potential energy for development. The continuous expansion of integrated circuit business demand has driven the company’s revenue and profit to a record high, including:
1) for special integrated circuits, the downstream demand showed an explosive trend. Although the overall capacity was under pressure, the company still actively coordinated resources to ensure order delivery. The subsidiary microelectronics achieved revenue (RMB 3.365 billion, + 101.08%), net profit (RMB 1.831 billion, + 108.78%), net profit increased by 1.99pct to 54.41% year-on-year, and the scale effect continued to be realized. According to the annual report, ① the company’s special FPGA products are developing rapidly, 2x nano FPGA series products occupy an important market position, and the development of new products is smooth; At the same time, ② special SOPC product platforms are widely used, and system level chips and supporting products have become one of the important sources of income; In addition, ③ in the field of digital and analog products, the company’s product share continues to expand, and some products such as digital power supply, clock and ADC / DAC have been sold, which is expected to become a new growth point of the company during the 14th Five Year Plan period.
2) intelligent security chip. The company’s products provide security for many fields such as mobile communication, financial payment and Internet of things / vehicles. The industry position is further consolidated, the revenue is realized (RMB 1.664 billion, + 22.11%), and the gross profit margin is significantly improved by 6.34pct to 31.17%, or it reflects the gradual increase of the added value of the company’s products. According to the annual report, ① the second-generation ID card and identity recognition products are advancing smoothly, and the overseas market share of SIM card chip continues to increase; ② Bank Of China Limited(601988) IC card chip share has been further increased, financial terminal security chips have been commercialized on a large scale overseas, and the digital currency pilot scheme is expected to lead the new direction of the financial payment market; ③ The R & D and industrialization of high-end safety chips and vehicle controller chips of convertible bond raised investment project are progressing smoothly. The vehicle specification level safety chip scheme has been commercially available in batches in many vehicle enterprises, which is expected to bring new impetus to development.
On a quarterly basis, the net profit attributable to the parent company from 21q1 to Q4 was RMB 324 million, RMB 552 million, RMB 582 million and RMB 496 million respectively, with year-on-year growth of 70.31%, 160.49%, 105.87% and 307.33% respectively, showing a gradual acceleration trend. According to the performance forecast of 22q1, the net profit attributable to the parent company is expected to be RMB 510550 million, still maintaining a rapid growth trend, It is expected that with the continuous increase of aerospace special equipment during the 14th Five Year Plan period and the continuous improvement of the company’s relevant supporting capacity, the company is expected to continue to maintain a rapid growth momentum in 2022.
The gross profit margin and net profit margin have increased simultaneously, and the profitability has been continuously enhanced. In 2021, the gross profit margin of the company increased by 7.15pct to 59.48% year-on-year, which is expected to be mainly due to the increase of 11.82pct to 62.98% of the revenue of special integrated circuit products with high gross profit. At the same time, the net profit margin increased by 12.63pct to 37.14% year-on-year due to the 223% year-on-year increase of investment benefits. Considering that the downstream demand of the company’s special integrated circuits continues to maintain a strong trend, it is expected that with the continuous increase of the shipment of high value-added products, The company’s profits can or still have room for improvement.
The increase of cash flow and forward-looking indicators of balance sheet have been significantly improved. In 2021, the company’s contract liabilities increased by 471 million yuan, 211.92% higher than that at the beginning of the period, of which 21q4 increased by 248 million yuan, reflecting that the company’s demand side is still full at the moment. Meanwhile, prepayments and inventories increased by 108.94% and 37.26% respectively compared with that at the beginning of the period, of which raw materials, entrusted processing materials, products in process and issued goods increased by 52.98%, 125.64%, 29.8% and 29.7% respectively, indicating that the company is actively organizing production by production and preparation, To cope with the continuous growth of orders. Meanwhile, the company’s cash flow from operating activities increased by 185.51% year-on-year, mainly due to the growth of the scale of integrated circuit business, the increase of the company’s profit and the increase of sales receipts.
Special IC is the core asset of the company, and the development capability boundary of “expanding category + expanding downstream”
The company’s subsidiary, the national microelectronics layout special IC category, has developed into a platform supporting enterprise in the field of high barrier military semiconductors, and continues to actively explore the capability boundary through the way of “expanding category + expanding downstream”. At present, it has a high market share in the field of aviation and aerospace. With the modernization and upgrading of China’s weapons and equipment and the accelerated promotion of domestic substitution, it is expected that during the 14th Five Year Plan period, China’s Microelectronics will maintain rapid growth in the field of special IC and continue to enjoy the continuous upward prosperity of the industry.
The edge of smart security card chips has improved, and convertible bonds have been raised and invested in high-end fields
The subsidiary Tongxin microelectronics is one of the core suppliers of intelligent security chips in the fields of mobile communication, financial payment and identity authentication. With the withdrawal of major overseas competitors, the company is expected to usher in marginal improvement of profitability; In the early stage, the company issued convertible bonds to raise funds for the layout of high-end chips and vehicle controller chips. At present, the R & D and industrialization process is smooth. It is expected that with China’s continuous investment in the fields of Internet of things and cloud computing, as well as the successful introduction of the company’s vehicle regulation level security chip scheme into many vehicle enterprises and mass supply, it will bring new impetus to the company’s long-term sustainable development.
Investment suggestion: the company is a leading enterprise in the field of special IC in China, and continues to explore its own capability boundary through the way of “expanding category + expanding downstream”. At present, it has a high market share in the field of aerospace and aviation, and is expected to maintain rapid growth under the background of accelerating the information construction of our army and domestic substitution; At the same time, the company’s intelligent security chip business is ushering in marginal improvement. The continuous breakthroughs superimposed on other high-end chips and vehicle chips have sufficient long-term development power. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.86 billion, RMB 4.00 billion and RMB 5.44 billion respectively, and the corresponding valuations are 37x, 26x and 19x respectively, which are rated as “Buy-A”.
Risk warning: orders for special integrated circuits are not as expected; Orders for smart security chips fell short of expectations. Revise the title of the original report “net profit attributable to parent company + 142.28% year on year in 2022 and rapid growth of special integrated circuit business”, and now change it to “net profit attributable to parent company + 142.28% year on year in 2021 and rapid growth of special integrated circuit business”
