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Zhaoyi Innovation (603986): Basically bottomed out performance and concerned about profit improvement brought by memory price recovery

Zhaoyi Innovation (603986): Basically bottomed out performance and concerned about profit improvement brought by memory price recovery

1H19 performance exceeded the company’s index Zhaoyi Innovation 1H19 revenue reached 1.2 billion US dollars, an annual growth of 9%; net profit reached 200 million US dollars, a decline of more than 20%, gross profit margin remained flat, down 0 chain.

8ppt, previous guidance from previous companies.

The company’s performance exceeded expectations mainly due to the substantial increase in sales of wireless Bluetooth headsets, which led to the replacement of some of the company’s products.

The company’s gross profit margin in 1H19 remained flat for ten years, and decreased by 0 from the previous month.

8 units.

We believe that the price of NOR Flash is basically stable. In addition to the slight decline in the unit price of low- and medium-capacity products in the third quarter, the prices of other capacity have stopped falling. Supply and demand will improve in 2020, but the company currently replaces the corresponding 2020 58.

8 times price-earnings ratio is high, and maintain a neutral rating.

Development Trend The price of NOR Flash is basically stable, and some products are in short supply: the company’s second-quarter performance was significantly higher than expected, mainly due to the sharp increase in sales of wireless Bluetooth headsets, which led to a shortage of 128Mb products.

Due to the increase in demand for wearable devices, 5G communication base stations, etc., the supply and demand gradually balanced. In the third quarter, the price of NOR Flash basically bottomed out.

In terms of technology, the company’s development of NOR Flash series products based on 55nm technology converters is progressing smoothly. The company expects that this product is expected to achieve mass production in 4Q19.

The Internet of Things, wearable devices, etc. have higher package size requirements, so the demand for the predetermined length to 55nm is urgently expanding.

The company’s SLC NAND products at 24nm are currently progressing smoothly and will be positioned in the consumer market in the future, but the amount of time required will still take time.

MCU 2Q19 rebounded strongly, welcoming domestic alternatives: The company stated that the 2Q19 MCU business rebounded by more than 40%, and in June it created a record of 10.5 million units that could be replaced in a single month. We expect to increase the output growth rate to 20% to the maximum

In terms of products, 青岛夜网 the company launched the world’s first general-purpose GD32V series based on the RISC-V core in August. It is committed to further expanding overseas markets, providing a richer product portfolio, and creating an “MCU department store”.

In addition, the company said that due to the Sino-US trade friction catalysis, the company’s MCU products gradually began to be favored by some local customers, and the domestic demand for domestic substitution is expected to further strengthen in the future.

Sili Micro’s consolidation strengthens performance: In June 2019, Soli Micro completed the consolidation.

Sili Micro will launch 2 new products in the second half of the year, 1) Ultra-thin fingerprint recognition chip under the screen, this solution helps to reduce the module height to 0.

6mm; 2) CSM solution, which will reduce the size and provide more possibilities for device stacking inside the mobile phone.

Earnings forecasts and estimates Taking into account the stand-up of the company and the price of NOR Flash from June 2019, we will increase our revenue for 2019/20 by 25% / 38%.

However, after the consolidation, the company’s R & D expenses will further increase (R & D, fair incentives, etc.), and we will increase the net profit in 2019/20 by 17% / 21%.

The current consensus of the company corresponds to 58 in 2020.

8 times price-earnings ratio, in the middle and upper reaches of the historical forecast range, maintain a neutral rating, but raise the target price to 110.

00 yuan (9.

5% down space), corresponding to 53.

2 times 2020 price-earnings ratio.

Risks NOR Flash products are rapidly moving towards expectations, high capacity penetration, and unit price growth.