Ziguang Guowei (002049) Third Quarterly Report Review: Main Business Scale Expands and Maintains High Growth in Third Quarter
Event: The company released the third quarter report for 2019 with single quarter revenue (9.3 billion yuan, +41.38%), revenue from the beginning of the year to the end of the third quarter (24.9 billion, +45.48%), net profit attributable to mother in a single quarter (1.7.2 billion, +2.54%), net profit attributable to mothers from the beginning of the year to the end of the third quarter (3.6.5 billion, +26.88%).  Key points of investment: The company’s integrated circuit business has expanded its operating scale, and its revenue has increased.The company’s main business is the design and sale of integrated circuit chips, including smart security chips, special integrated circuits and memory chips.Benefiting from the expansion of the company’s main business, the company’s revenue in the third quarter (9.3 billion yuan, +41.38%), net profit attributable to mother (1.7.2 billion, +2.54%), gross profit margin has risen sharply this year, reported at 35 in the half year.72% (+8.68pcts), remained high at the end of the third quarter, reaching 35.83%, still a slight increase around the first half.In terms of three fees, the company’s sales expenses accounted for (3.39%, -0.35pcts), the proportion of management expenses (12.24%, +0.49pcts), accounting for financial expenses (0.52%, +0.73pcts), the increase in the proportion of financial expenses was mainly due to the increase in exchange gains and gains from the exchange of US dollars against currencies in the same period of the previous year, and the significant increase in cash discounts in the current period.In addition, the company’s R & D expenses are 1.4 trillion, an increase of 25 over the same period last year.01%.Due to the increase in the scale of integrated circuit operations, in order to increase market share and increase stocking, the company extended the customer account period, and the bill receivable budget increased by 50 earlier.64%, the balance of accounts receivable increased early 53.13%.In addition, due to the increase in prepayment for goods and services, the company’s prepayment balance increased by 117 compared with the beginning of the year.74%.In terms of cash flow, net cash flow from operating activities was -2.3.9 billion yuan, a decrease of 126 over the same period last year.82%.Company Inventory 7.7.2 billion yuan, an increase of 0 from the interim report.4.9 billion, the inventory turnover rate has improved compared to the intermediate report.It is expected that the company’s IC chip business expansion volume will be stable in the fourth quarter, and it is expected to maintain a high growth rate, and the recovery of some accounts receivable can also strengthen the company’s cash flow.  The company’s smart chip low-end market is sustainable and stable, and the high-end market expansion volume has increased significantly.The company’s smart security chip business mainly includes smart card security chips and smart terminal security chips.Among them, the smart card security chip has a fierce competition in the low-end and telecommunications cards. On the basis of ensuring the stable expansion of the low-end cards, the company effectively increases the market share of the high-end cards and captures the market.Analysis from the market demand side, driven by the requirements of localization rate of bank card chips, product sales have achieved leapfrog growth, and the market share has continued to increase.The second-generation ID card chip is still at the peak of the 10-year renewal period, and the previous card issuance is expected to be the same as last year.In addition, the company’s new advanced security chip market has been successfully promoted and has gained more customer recognition. It has gradually shifted in the POS market and scan code payment markets.In the field of smart terminal security chips, the overall market size of USB-Key chips has declined slightly. The company has seized market share through good cooperation with customers, and its product output has grown against the trend.  The successful development of FPGA series products has helped the company strengthen the leading enterprises in the field of special integrated circuits.The company’s new generation of large-scale integrated circuit device series has been completed. This product is one of the core devices of domestically produced alternatives for users. Its smooth launch will further strengthen the company’s leading level in this product field.The company continues to improve the cost-effectiveness of the Logos series, the compact price-to-price ratio, and the CPLD product models of the Compact series, and actively promotes the application and industrialization of Titan, Logos, and Compact products.Batch concentration.  The memory chip industry has entered a downward cycle, and the company’s expansion volume remains stable.According to the content disclosed by the Interim Report, the prices of memory chip products continued to fall significantly in 2019, and the industry entered a downward cycle.The company’s DRAM memory chip and memory module series products continue to maintain stability in servers, personal computers, set-top boxes, televisions, etc., and steadily grow in the domestic computer application market.The company’s embedded ECCDRAM storage products provide stable supply in industrial control, power, security, communications and automotive electronics where safety and high reliability are required. DDR4 modules and other products are sold in small quantities. Newly developed products and solutions are progressing smoothly.The application-specific integrated circuit design and testing service business actively expanded the customers within the group, with a stable business scale.  The crystal business continued to be affected by the expansion of industry capacity, and the company actively expanded into new areas of the market.Affected by the continuous expansion of the domestic phosphate crystal industry’s expansion capacity, SMD3225 products are still oversupplied, and product prices have accelerated to decline.In addition, international trade frictions have also adversely affected the export of quartz crystal products.The company has stepped up the development of new products, further explored new market areas such as 5G mobile communications, automotive electronics, industrial control, and smart meters, and actively matched the domestic demand for frequency components of domestic communication manufacturers.  The company intends to acquire 100% equity of Ziguang Liansheng. Its wholly-owned subsidiary Linxens is one of the world’s largest manufacturers of intelligent security chip components, helping the company to explore overseas markets.Linxens’s main business is the design and production of smart security chip micro-connectors, RFID 夜来香体验网 inlays and antennas, which are closely related to the company’s business.Through this asset reorganization, the company will obtain a secure and stable supply source of micro-connectors, expand overseas channels and enhance global competitiveness.  Investment recommendations We expect the company’s net profit attributable to its mothers to be 4 in 2019-2021.29 billion, 5.4.9 billion and 7.3.0 billion, EPS is 0.71 yuan, 0.90 yuan and 1.16 yuan, corresponding to PE is 72, 56, 44 times.According to 60 times PE in 2020, the corresponding target price is 54.00 yuan / share, given a “buy” rating.  Risk reminder: the company has a large number of export products, and there is exchange rate risk; the company’s receivables increase year by year, there is a risk of untimely repayment, and the cash flow is under pressure; the company has a major asset reorganization plan, and it is necessary 北京夜网 to pay attention to relevant risk indicators