\u3000\u3 Guocheng Mining Co.Ltd(000688) 088 Arcsoft Corporation Limited(688088) )
Event overview
Arcsoft Corporation Limited(688088) released the annual report of 2021 and the first quarterly report of 2022 on April 27. In 2021, the company realized an operating revenue of 573 million yuan, a year-on-year decrease of 16.12%, and realized a net profit attributable to the parent company of 141 million yuan, a year-on-year decrease of 44.01%, deducting 97 million yuan of non attributable net profit, a year-on-year decrease of 50.83%. In 2022q1, the company realized an operating revenue of 136 million yuan, a year-on-year decrease of 9.39%, and realized a net profit attributable to the parent of 25 million yuan, a year-on-year decrease of 55.86%, deducting a net profit not attributable to the parent of 14 million yuan, a year-on-year decrease of 66.32%.
Short term performance is under pressure, and smart car performance is on the eve of release
On the revenue side, the company achieved an operating revenue of 570 million yuan in 2021, a year-on-year decrease of 16%. 1) The revenue of smart phone business was 520 million yuan, down 13% year-on-year. On the one hand, the global epidemic and chip shortage were intertwined, which had a great impact on the consumer electronics industry; On the other hand, the mobile phone market is mature, the company’s original customer shipments have decreased, and the new customer shipments have not been released. 2) The revenue of intelligent driving was RMB 20 million, a year-on-year decrease of 70%, mainly due to the shortage of upstream raw materials and the strategic adjustment of the company’s intelligent driving business. It is expected that the company is expected to release more performance related to intelligent vehicles in the second half of the year. On the profit side, the company realized a net profit attributable to the parent company of 140 million yuan in 2021, a year-on-year decrease of 44%. It is mainly due to the increase of upstream costs and the company’s continuous increase in R & D investment. In terms of gross profit margin, the company’s comprehensive gross profit margin was 92%, with a year-on-year increase of 2.4pct, mainly due to the increase of the proportion of high gross profit business smartphones in total revenue to 93%.
High prosperity of intelligent automobile, continued to sign pre installation projects
In terms of industry, according to the statistics of China Automobile Association, China’s automobile sales in 2021 achieved the first positive growth since 2018, with sales of 26.28 million vehicles, a year-on-year increase of 3.8%. According to the global data of vtank, the growth of intelligent cockpit and automatic cockpit is expected to accelerate to $46.2 billion in 2021, compared with that of the global cockpit market. On the one hand, the company has accelerated the layout of intelligent driving front clothing. On the other hand, it has increased the investment in technology and talents of intelligent driving front clothing; On the other hand, continue to deepen cooperation with host manufacturers and Tier1. At present, the front loading mass production fixed-point project involves a variety of mass production models of great wall, Chang’an, Dongfeng lantu and other car factories. Among them, some models of Dongfeng lantu and great wall projects have achieved mass production and shipment. The fixed-point project of front loading mass production needs a long period from large-scale mass production to terminal sales, so the company’s short-term performance is under pressure; However, in the long run, the trend of intelligent vehicle is clear, and the commercialization of intelligent cockpit is accelerated. The company has won many front installation points relying on the leading visual algorithm ability, and the performance is expected to continue to be realized in the next 1-2 years.
R & D investment continued to increase, and in-depth cooperation in the industrial chain continued to strengthen
The company continued to increase R & D investment. In 2021, the R & D expense rate of the company was 47%, with a year-on-year increase of 9.2pct. In terms of sub projects, 1) in 2021, the company invested 140 million yuan in the research and development of smart phone related technologies. At present, the construction of environment map and 3Dmodeling of objects in slam have been realized; 2) 110 million yuan is used for the research and development of IOT technologies such as intelligent driving, mainly developing interactive technologies based on infrared camera, single shot RGB camera, double shot and deep shot; 3) 15 million yuan was used for the development of fingerprint technology under the optical screen, and the security indicators continued to be strengthened. At the same time, the company attaches importance to in-depth cooperation with industrial chain partners and cooperates with mainstream companies upstream and downstream of the industrial chain such as Qualcomm and MediaTek to master the ability to continuously develop and iterate algorithms that better match the hardware, so as to quickly respond to customer needs.
Investment advice
The company takes visual AI algorithm as the core, deeply cultivates smart phone camera technology, and expands off-screen business around mobile phones. Cutting into the smart car track through technology extension, the front installation points of dozens of brands have been determined. We expect the company to achieve revenue of RMB 700 / 10 / 1.5 billion from 2022 to 2024, with a year-on-year increase of 21% / 48% / 44%; The net profit attributable to the parent company was 170 / 220 / 320 million yuan, with a year-on-year increase of 17% / 33% / 46%, maintaining the “overweight” rating.
Risk tips
1) the risk that the company’s new business development is not as expected;
2) the risk that the company’s core technology iteration speed is lower than expected;
3) the risk that the development of smart phone industry is less than expected;
4) risk of intensified market competition.
