“Investors Network” Defender crowned
Editor Wu Yue
With the official launch of the “Compute from East to West” project, computing chips, memory chips, server chips, and communication chips have all recently become beneficial sectors. This has been reflected in recent secondary markets, and related concept sectors have been boosted as expected.
As a leading domestic analog chip design company, Sripp Microelectronics Technology (Suzhou) Co., Ltd. (“Sripp”, 688536.SH) released a performance forecast on February 24. Net profit attributable to parent company owners in 2021 is expected to be 444 million yuan, up 141.32% year on year; operating income of 1,326 billion yuan, up 134.06% year on year; basic earnings per share of 5.54 yuan, up 95.76% year on year. The performance is impressive.
Looking at the world, compared to foreign analog chip leaders, domestic manufacturers started late. Currently, most manufacturers' products are still in the low-end field and are too homogenous. However, Srip is one of the few companies in the industry that has the ability to replace domestic production.
However, during the development process of Srip, there are also problems that need to be wary of, such as the concentration of large customers being too concentrated.
Signal chain+power management two-wheel drive
Founded in 2012, Srip began to work and accumulate in the analog chip signal chain in 2016. With the advent of the 5G era, the domestic signal chain chip market continued to develop. Srip seized the opportunity to establish cooperative relationships with domestic telecommunications leaders Huawei and ZTE, and developed a new series of converters and linear products for them, and gradually entered its core supplier system through excellent technology and products.
As Srip's largest customer, Huawei not only has business cooperation with the company, but its subsidiary Hubble Investment also holds shares in the company. According to the latest financial report, Huaxin Venture Capital is the largest shareholder (18.55%), founders Zhou Zhixu and Ying Feng accounted for 8.38% and 7.9% respectively, and Hubble Investments' 6% shareholding ranked as the sixth largest shareholder.
Srip's shareholding structure
According to Hubble's investment cases and characteristics in the past, the invested enterprises will basically be included in Huawei's industrial chain, not only investing in financial support, but also issuing large orders, because Hubble Investments often consider the overall development of Huawei, with the goal of complementing the supply chain of the industrial chain and reducing dependence on foreign manufacturers. With the support of capital and industrial resources invested by Hubble, Sripp has grown by leaps and bounds since it went public.
Srip's products are mainly divided into two categories: signal chain analog chips and power management analog chips. Signal chain products include operational amplifiers and comparators. Power products include audio/video amplifiers, analog switches, interface circuits, data conversion chips, reference voltage chips, LDO, DC/DC converters, power monitoring circuits, motor drivers and battery management chips.
Details of Srip's product revenue for the first three quarters of 2018, 2019, 2020, and 2021
Signal chain products are Sirup's main revenue source. During the third quarter reporting period, signal chain products accounted for 80.18% of revenue, achieving revenue of 714.4324 million yuan, an increase of 61.69% over the previous year. After years of accumulation, the company has laid out almost all segments in the signal chain field, established a stable supply chain, maintained a high level of revenue, and a stable and clear growth trend.
In addition, according to the company announcement, the company's power management chip business revenue in the first three quarters of 2021 was 177 million yuan, an increase of 1240.97% over the previous year, bringing the share of power management products in the revenue share of power management products to 19.8% from 11.14% in the first quarter. This is due to mass production of products such as high-current and low-dropout linear stabilized power supplies, high-speed gate drivers, ultra-low noise, low-dropout linear regulated power supplies, and power monitoring.
According to public information, power management chips account for about 53% of the analog chip market. They are one of the largest market segments for analog chips, and exist in almost all electronic products and devices. At the same time, it is widely used and mature, technology iteration is slow, and barriers are relatively low. Once the company has formed a stable customer base, it can provide a stable source of growth for the company. As markets such as new energy vehicles grow, the global power management chip market will continue to benefit.
At the same time, according to the strategy stated by Siripu in the November 2021 public investor exchange announcement, the company will continue to lay out its products around linear power supplies, general DCDC switching power supplies, PMICs, digital multi-phase power supplies, and battery management systems. The overall product structure is balanced and rationalized, and has stronger growth momentum. 2021 also marks the official development of Srip from the signal chain era to the two-wheel drive era.
The top five customers account for more than 70% of revenue
According to the report for the third quarter of 2021, Srip has 204 R&D personnel, accounting for 67.77% of the total number. Among R&D technicians, those with master's and doctoral degrees account for 62.75%. Since listing, equity incentive plans have covered the vast majority of employees to keep employees motivated.
Details of Srip's R&D Expense Growth in 2021
At the same time, R&D expenses have maintained a rapid growth trend since the beginning of the year. Compared with the same period in 2020, there was a sharp increase of more than 110%.
The proportion of R&D expenses of comparable companies in the same industry
Comparing comparable companies in the same industry, it can be clearly seen that Siripu's share of R&D investment is at a high level in the industry.
In the short term, share payment fees will increase to a certain extent due to stock incentive plans. However, looking at a longer cycle, the company can continue to attract outstanding talents in the industry, maintain the excellence of the R&D team, further help product development growth, and speed up domestic substitution.
It is worth noting that due to the reality that the communications industry naturally has a high concentration of vendors, Srip is extremely dependent on leading customers. According to customer information disclosed in regular reports over the years, the company's sales revenue to the top five customers all accounted for more than 70% of operating income during the reporting period.
Under such objective conditions, if the client company undergoes major changes in the future or is unable to maintain its advantage in the supplier system, then Srip will face the operating risk of being pressured by the sales side, and revenue performance will be greatly reduced, which will have an adverse impact on the company's operations.
To deal with this problem, Sirup has made efforts to expand customers. According to the video conference on November 30, 2021, in the third quarter of 2021, a total of more than 400 trading customers were added, including Samsung, Mitsubishi Elevator, Midea, Desai Seaway, Panasonic, etc., and the company has already established cooperation and started trading with these customers. However, it will take a certain amount of time and process for each client to start business.
Furthermore, Srip has strong competitive advantages in application fields related to signal chains and analog chips, and its comprehensive gross margin and ROE (return on net assets) are at the forefront of the industry. In the first three quarters of 2021, the comprehensive gross margin declined slightly due to the release of power management chips, but it still reached 60.99%, which is comparable to industry leader Texas Instruments.
Siripu also received attention from many institutions within two months of this year. Among them, Minsheng Securities conducted in-depth research on Siripu. The company's net profit for 2021/22/23 is estimated to be 438 million/467 million/864 million yuan respectively. Corresponding to current prices (2022.2.25 closing price) PE is 121/114/62 times, respectively. It is optimistic that the company can expand its product lines in power management, isolation, MCU, AFE, etc., highlighting the platform-based layout.
Also, according to the opinion of the Northeast Securities Research Report, Srip's industry structure and customer structure in the non-communications sector are scattered, and the performance base is low. The non-communication sector has been introduced to customers in the past two years, and future performance is more flexible. (Produced by Thinking Finance) ■