\u3000\u3 Guocheng Mining Co.Ltd(000688) 018 Espressif Systems (Shanghai) Co.Ltd(688018) )
Key investment points
Event: the company released the report for the first quarter of 2022, realizing an operating revenue of 290 million yuan, a year-on-year increase of 6.8%; The net profit attributable to the parent company was 30 million yuan, a year-on-year decrease of 18.1%.
Q1 performance was under pressure and gross profit margin improved month on month. In the first quarter, as a traditional off-season, some cities were suddenly shut down due to the impact of covid-19 epidemic. The company achieved a revenue of 290 million yuan, a year-on-year increase of 6.8%, and a net profit attributable to the parent company of 30 million yuan, a year-on-year decrease of 18.1%. The overall performance is under pressure. The company’s main warehouse is located in Shenzhen. At present, the logistics has been restored in April. In terms of gross profit margin, the company’s Q1 comprehensive gross profit margin was 41%, up 3.6pp from 2021q4. In terms of expense rate, the sales expense rate was 3.2% (YoY -0.44pp), the management expense rate was 4.6% (YoY + 0.13pp), the financial expense rate was 0.2% (YoY + 0.24pp), and the R & D expense rate was 25.9% (YoY + 4.13pp). In terms of R & D, due to the company’s entry into Wireless SoC from the field of WiFi MCU and the expansion of the layout of AI + software + cloud, the R & D expenses in the first quarter totaled 74.848 million yuan, a year-on-year increase of 27.1%. In terms of inventory, the company’s inventory balance was about 400 million yuan, an increase of 21.5% month on month, mainly based on the judgment that the upstream production capacity is still tight in 2022. At the same time, the intelligent penetration rate of downstream non consumer industries such as industrial control, medical treatment and energy management has increased, and the consumer market is expected to recover rapidly, so it is prepared in advance.
New products continue to be promoted and Rainmaker is commercialized. In 2021, the company released three chips, the first C6 supporting wi-fi6, H2 supporting thread and ZigBee, and C2 creating the ultimate cost performance. Among them, C2 is packaged in 4mm 4mm QFN, and the bare chip is smaller than esp8266. At the same time, the Rainmaker cloud platform built by the company has also been commercialized and is expected to continue to contribute to its performance in the future. At present, the two products C3 and S3 released by the company in 2020 have contributed to the performance, and the three chips released in 2021 will enter the stage of mass production and marketing this year.
The proportion of overseas has increased steadily, and the community ecology has consolidated its core competitiveness. Since March 2022, many regions in China have been affected by the epidemic, and China’s demand has been suppressed in the short term, while overseas demand is still strong. At the same time, the company has also actively explored markets outside the mainland. The proportion of Hong Kong, Macao, Taiwan and overseas markets has increased from 16.9% in 2019 to 32.5% in 2021. In addition, the platform effect of the company’s developer ecosystem is gradually reflected, and the b2d2b business model is continuously promoted. By the end of 2021, the number of esp32 projects and esp8266 projects on GitHub had reached 29000 and 35000 respectively. We believe that based on connection and in-depth layout processing technology, the company’s products further extend from wi fimcu to wirelessoc, and the downstream fields expand to industrial control, medical treatment, energy management, Internet of vehicles and other fields at the same time. It is expected to restore high growth in the future.
Profit forecast and investment suggestions. It is estimated that the company’s EPS from 2022 to 2024 will be 3.12 yuan, 4.51 yuan and 6.20 yuan respectively, and the corresponding PE will be 33, 23 and 17 times respectively, maintaining the “buy” rating.
Risk tip: the risk of sharp price reduction due to intensified industry competition; Risk of sharp rise in the purchase price of raw materials; Risk of product R & D progress falling short of expectations.
