Northeast Securities recently released a research report giving Yingheng Technology (01760.HK) a “buy” rating.The bank expects the company's revenue for 2023-2025 to be 65.21/85.34/10.591 billion yuan, net profit to the parent is 593/7.73/912 million yuan, EPS is 0.55/0.71/0.84 yuan respectively, and the price-earnings ratio is 5.15/3.95/3.35 times, respectively. Under the long-term trend of smart electricity, Northeast Securities is optimistic that the company will usher in long-term steady growth as an automotive electronics solution provider with core capabilities based on chips, giving it a “buy” rating.
The company has been deeply involved in the automotive electronics field for 20 years. Since its establishment, the company has invested in R&D. From promoting the localization of automotive electronics in the early stages to electrification and intelligence in the future, the company's business landscape has now expanded to various fields such as vehicle body, power, safety, new energy and intelligent connectivity, and is committed to becoming a platform-based service provider for automotive electronics solutions. The company uses an asset-light, research-heavy business model to provide customized automotive electronics solutions downstream based on advanced R&D technology platforms and mature industrialized platforms.
Backed by Infineon and the Horizon, benefiting from the electrification and intelligence of automobiles
The bank said that on the one hand, Infineon is a leading company in the automotive semiconductor field. With the development of electrification and intelligence of new energy vehicles, downstream demand for automotive semiconductors also continues to grow. As an important partner of Infineon in Greater China, the company accounts for 30-40% of its non-direct sales pipeline share. On the other hand, with continuous technological breakthroughs in the intelligent driving industry and the imminent implementation of relevant regulations, the penetration rate of L2/L2+ intelligent driving continues to increase, L3 intelligent driving has begun to climb, and demand for intelligent driving chips has also entered a period of rapid growth. Nvidia, a leading company, has the most advanced technology and a more complete product matrix, but in the face of influencing factors such as cost control, car companies are also actively seeking backup plans. Domestic chips such as Horizon have ushered in domestic replacement opportunities through this, and are already installed in many new energy models. One of the major features of the Horizon camp is that it has three IDH partners, which can carry out customized design requirements around different Tier 1 and accelerate mass production of downstream solutions. Jinmai Electronics, a subsidiary of Yingheng, is one of them, and has the most comprehensive product cooperation lineage. Currently, the company has launched new products such as the ZCU, an area controller based on Infineon's third-generation AURIX TC4X series MCU, and an integrated cabin driving controller based on the Horizon Dual J5+ core relaxation X9U+ Infineon MCU, and has signed a strategic cooperation agreement with Mio to promote the implementation of the smart driving mass production plan. As a leading automotive electronics company, the company will achieve steady growth along with the continuous expansion of upstream volumes such as Infineon and Horizon under the trend of electrification and intelligence in the industry.
The bank believes that the company says gross margin is stable, and that net profit is hampered by short-term R&D investment in the short term.The company uses a cost addition model, so the gross margin level can be stabilized at around 20%. Under the asset-light and research-heavy model, forward-looking R&D investment is essential as a guarantee for the company to maintain its competitiveness. In the first half of 2023, the company's net interest rate fell 1.5 pct to 5.8% year on year, mainly due to a 1.9 pct increase in R&D expenses in revenue, including R&D personnel recruitment and equipment procurement.
Risk warning:The penetration rate of new energy fell short of expectations, and intelligent development fell short of expectations.