Dongxin's local small and medium capacity memory chip leaders benefit from the explosion of the niche market [institutional review]

The storage industry has a vast market, and the rise of emerging industries brings opportunities.

Memory chips are the largest segment of the integrated circuit market, accounting for 35.05% in 2021. With the rise of automotive electronics, 5G communications, Internet of things, wearable and other emerging fields, memory chips will play a more important role in the whole industry chain. According to IC Insights's forecast, the global market for memory chips from 2021 to 2023 will reach US $155.2 billion, US $180.4 billion and US $219.6 billion respectively, with increases of 22.5%, 16.2% and 21.7%, respectively. In terms of the domestic market, the World Semiconductor Trade Statistics Association predicts that the domestic memory chip market will reach 649.2 billion yuan in 2023. From the perspective of the competition pattern, at present, the global storage chip market is monopolized by overseas enterprises with a high degree of concentration, but the whole market is divided, and there are opportunities for differentiated development in the small and medium capacity storage market. at present, the suppliers of small and medium capacity memory chips are mainly from Taiwan and mainland China, including Huabang Electronics, Wang Hong Electronics, Zhaoyi Innovation and Dongxin Co., Ltd. Among them, Huabang Electronics and Wang Hong Electronics occupy a higher market share, with the continuous improvement of domestic demand in the future, mainland enterprises are expected to usher in a good opportunity for development.

Focus on small and medium-sized capacity market, with clear independent intellectual property rights

Founded in 2014, focusing on the design, production and sales of medium and small capacity NAND, NOR flash memory chips, DRAM memory and MCP, Dongxin is one of the few companies in mainland China that can provide NAND Flash, NORFlash and DRAM products at the same time, compete directly with global well-known companies in the same industry and break through overseas technology monopolies in the medium and medium capacity flash memory chip market. The core technology of the company comes from independent research and development, including 6 NAND Flash-related technologies, 2 NORFlash-related technologies and 1 DRAM-related technologies. In terms of supply chain, the company has established stable cooperative relations with SMIC, LJC and other well-known wafer foundry, as well as Ziguang Hongmao, China Resources Axa, Nanmao Technology, ATSemicon and other well-known closed test plants at home and abroad. In terms of downstream customers, the company's products have not only been certified in many well-known platform manufacturers, such as Qualcomm, Broadcom, MediaTek, Ziguang Zhareui, ZTE, Ruixin Weiwei, Beijing Junzheng, Hengxuan Technology and so on. at the same time, it has entered the supply chain system of well-known customers at home and abroad, such as Samsung Electronics, Haikangwei TV, Dahua shares, Goyle shares, Voice Holdings, ZTE, Huierfeng and other domestic and foreign well-known customers. In the first three quarters of 2021, the company achieved operating income of 785 million yuan, an increase of 32.75% over the same period last year, and a net profit of 168 million yuan, an increase of 923.57 yuan over the same period last year. At the same time, profitability continued to improve, with a gross profit margin of 38.59%, an all-time high, and a net profit rate of 23.29%.

High-end products such as layout 1xnm and car specification level bring long-term growth.

Raise 750 million yuan for the layout of four major projects: 1xnm flash memory product research and development and industrialization project, car regulation level flash memory product development and industrialization project, R & D center construction project and supplementary liquidity. Among them, the 1xnm flash memory project is jointly developed by the company and SMIC, which aims to achieve a further breakthrough in the advanced process technology of domestic memory chips, so as to open up space for the future design of products with higher capacity and more cost advantages, and accelerate the realization of domestic substitution. The automotive specification-level storage project conforms to the layout of intelligent networking functions in the automotive industry, vigorously develop high value-added automotive memory chips that require higher value-added memory chips than traditional consumer electronics memory chips in the aspects of process technology, use environment, anti-vibration ability, reliability and so on. In addition, the company's R & D center projects include the research and development of deposit and accounting integrated chips, DTRNAND and other forward-looking products, aiming to expand the company's product range from general-purpose chips to characteristic performance products. In the future, high-tech barrier products are expected to achieve higher unit price positioning, optimize the company's product structure, improve the profit center, and establish a competitive advantage for long-term development.

Profit forecast

It is predicted that the company's income from 2021 to 2023 will be 11.71,15.44 and 2.086 billion yuan respectively. The, EPS (does not consider the over-raised funds for other purposes) is 0.55,0.76 and 0.99 yuan respectively, and the current stock price corresponding to PE is 82,60 and 46 times respectively, giving "recommended" investment rating.

Risk hint

The downside risk of the product price cycle in the storage industry; the risk that the product iteration is less than expected due to technology upgrading; the risk that the market is small and the market share is further reduced; the risk that the cost does not have the advantage of scale; the risk of international trade friction; the risk that the schedule of the fund-raising project is not as expected.