Zhuosheng Micro (300782), listed on the GEM in June 2019, is the leader in domestic radio frequency chip design. Since its listing two years ago, it has become a well-known bull stock in the A-share market. It once reached the mark of more than 500 yuan/share in the middle of this year, but its issue price was only 35.29 yuan/share. The trend was so fierce that it was eye-catching.
After July this year, Zhuo Shengwei gradually declined from its high position. On the evening of October 10, Zhuosheng Micro announced its third quarterly report, which showed a profit of 1.47 billion yuan to 1.54 billion yuan, an increase of 105.00% to 115.00% over the same period last year.
But faced with such a doubled performance forecast, investors did not buy it. On October 11, Zhuoshengwei fell more than 11%, and its market value evaporated by 13.5 billion yuan in one day. On the 12th, Zhuo Shengwei continued to fall by more than 6%. With
’s performance soaring, why did Zhuo Shengwei plummet?
Interestingly, the leading semiconductor equipment company , Northern China Huachuang , which had previously announced a sharp increase in its third quarter report, also suffered a sharp decline. The two leaders of the semiconductor industry chain seem to have made a bad start for the third quarter report market.
's deeper concern is that since the second half of 2020, while the intensifying wave of core shortages has brought about an improvement in industry prosperity, has it also covered up potential crises in the industry? As the epidemic gradually comes under control, does this wave of third-quarter reports in the semiconductor industry mean that the prosperity brought about by the shortage of cores has peaked?
The performance performance recently announced by leading semiconductor companies provides an observable perspective, but it is not the whole picture.
01. The performance of consumer electronics is slowing down during the peak season?
Regarding the performance growth in the first three quarters, Zhuo Shengwei said that the main reason was benefiting from the development of 5G communication technology and the company’s forward-looking product layout, and the company’s radio frequency module products continued to penetrate end customers. Although
's performance is expected to double year-on-year, 21 Century Capital Research Institute found that if viewed from a single quarter, Zhuosheng Micro's profit growth rate this year has gradually slowed down.
In the first quarter of this year, Zhuoshengwei achieved a net profit of 492 million yuan, a year-on-year increase of 224.34%; in the second quarter, it achieved a net profit of 522.1 million yuan, a year-on-year increase of 159.47%. Looking at the third quarter report preview, the company expects to achieve attributable net profit of 485 million yuan to 521 million yuan in the third quarter, a year-on-year increase of 33% to 43%. Compared with the previous two quarters, Zhuosheng Micro's performance growth rate in the third quarter has slowed down significantly.
So, is there a seasonal disturbance factor here?
Looking back at 2020, Zhuosheng Micro achieved net profits of 152 million yuan, 201 million yuan, 365 million yuan, and 355 million yuan respectively in the four single quarters, representing year-on-year increases of 263.41%, 81.18%, 114.61%, and 103.59% respectively. The situation of
in 2019 is basically similar. The net profits in the four single quarters were 41.77 million yuan, 111 million yuan, 170 million yuan, and 175 million yuan respectively. The year-on-year growth rates were 72.99%, 144.23%, 150.99%, and 596.74% respectively. .
In other words, the third quarter of the previous two years was a stage where Zhuosheng's micro-profit contribution was larger and the growth rate was higher, and it increased quarter-on-quarter. This is in line with the overall market situation of the semiconductor industry - the second half of the year has entered the peak season for consumer electronics, and related shipments in the upstream of the industry chain have increased.
Zhuosheng Micro mainly provides the market with RF front-end chip products such as RF switches and RF low-noise amplifiers, which are used in mobile smart terminals such as smartphones. Its end customers include Samsung, Xiaomi, Huawei, vivo, OPPO , Lenovo , Meizu , TCL, etc.
In fact, some market participants believe that Zhuosheng Micro's situation in the third quarter will be traceable in the second quarter. In the second quarter of this year, Zhuoshengwei's net profit increased by only 6% month-on-month, while the month-on-month growth rates in the same period in the previous two years were 165.85% and 32.54% respectively. The gap is not small. In terms of single-quarter operating income, in the second quarter of this year, Zhuosheng Micro's revenue even declined sequentially.
On the second day after the announcement of this year’s semi-annual report, the market performance was exactly the same as the current situation. Zhuosheng Micro closed down nearly 13%, which is quite rare.
It was precisely after the stock price reached its peak at the end of the first half of the year that Zhuo Shengwei's stock price continued to plummet. As of October 11, Zhuosheng Micro reported a closing price of 318.30 yuan/share, down 42% from the highest point during the year (544.68 yuan/share).
02. Will the price increase compress profit margins?
So, if Zhuo Shengwei’s performance changed in the third quarter, will it take the blame for the price increase?
From the perspective of Zhuoshengwei’s business model, this analysis is reasonable. The main business of
company is the research, development and sales of RF front-end chips. It mainly provides RF front-end chip products such as RF switches and RF low-noise amplifiers to the market, and provides IP authorization for application in mobile smart terminals such as smartphones. In other words, its main business model is to sell RF switches and RF low-noise amplifiers to end consumer electronics manufacturers.
But Zhuosheng Micro is just a chip design company. In the Fabless mode, after the chip design manufacturer completes the circuit design, it entrusts external wafer manufacturers and chip packaging and testing manufacturers to perform collaborative processing before providing final products to downstream customers. .
In other words, its cost mainly comes from wafer procurement and packaging and testing. Judging from past data, its largest wafer supplier is TowerJazz, and its largest packaging and testing supplier is Suzhou Riyuexin. Tower Jazz is an Israeli chip giant, and Suzhou Sun Moon is a packaging and testing factory invested by NXP Semiconductor Group and Sun Moon Group .
What needs to be noted is that since this year, both at home and abroad, the prices of wafers and packaging and testing have been rising one after another.
Zhuosheng Micro also mentioned in its listing prospectus that if the wafer market price and outsourcing processing fee prices increase significantly, it will have an adverse impact on the company's product shipments and profitability. Therefore, the company faces a certain degree of risks in raw material supply and outsourced processing.
Could it be that upstream cost pressures were further transmitted downwards in the third quarter, compressing Zhuosheng Micro's profit margins?
or not. On October 12, relevant people from Zhuosheng Micro told the 21st Century Capital Research Institute that the wave of core shortages and price increases in the first half of this year has been very obvious. The company’s performance in the first half of the year was also very good, and the price increase was not a surprise in the third quarter. situation. "In the face of price increases, the company has increased stocking and inventory. As for production capacity, it also has good cooperation with upstream suppliers."
From this point of view, the impact on the cost side is not the decisive factor.
03. What is the growth rate of the leader in radio frequency chips?
As the stock price plummets, Zhuosheng Micro, which was previously regarded as the only leader in domestic 5G radio frequency chip design, has also begun to be questioned about its growth.
21 Century Capital Research Institute has noticed that some people believe that as a Fabless manufacturer, and the gross profit margin of the company's radio frequency switches and LNA with average technical content is artificially high, the subsequent gross profit margin will most likely decline and affect the net profit.
Zhuoshengwei has announced that the average unit price changes of its main products, radio frequency switches and radio frequency low-noise amplifiers, from 2016 to 2018, are in a gradual decline state. The change in unit price seems to confirm the above statement to a certain extent.
However, from the perspective of changes in gross profit, Zhuoshengwei said at an investor event in August that the company continued to iteratively upgrade its products through the allocation and management of supply chain resources; the sales proportion of more high-end products continued to increase, so in the first half of the year The gross profit margin of radio frequency switches has improved.
In this regard, people from the above-mentioned company explained that the change in unit price is due to the improvement of product maturity, so there is a downward trend in price. In the future, as the product becomes more mature, the unit price is still expected to decline.
The increase in gross profit margin does not conflict with it. Zhuosheng Micro mentioned in this year’s semi-annual report that the company’s product types have achieved a leap from discrete devices to radio frequency modules. With the comprehensive advantages of the product’s high performance indicators and delivery stability, it is suitable for receiving end radio frequency modules in the 5G new frequency band. Product demand continues to rise.
"The process difficulty of module products is higher than that of discrete devices. The increase in module products is the main reason for the increase in the company's gross profit margin." The person said. In the third quarter report preview, the company once again mentioned that RF module products continue to penetrate among end customers.
Let’s look at peer comparison. Zhuosheng Micro’s main competitors include traditional European and American manufacturers Broadcom, Skyworks, Qorvo, NXP, Infineon, Murata, etc., as well as domestic competitors Ruidico , National Feixiang, Weijie Chuangxin, Weijie Seoul shares, etc.
Domestically speaking, only Weir Co., Ltd. is listed among its competitors, but the latter's main source of revenue is the CMOS image sensor product. The operating income generated by radio frequency and micro-sensing products in 2020 was 127 million yuan. Zhuo Shengwei’s revenue in 2020 has been close to 2.8 billion yuan. In terms of
growth, the market size of RF front-end chips is mainly driven by the demand for mobile terminals. Consumers' requirements for mobile data transmission volume and transmission speed are also constantly increasing, which relies on changes in mobile communication technology and the improvement of the performance of supporting radio frequency front-end chips. The consensus in the
market is that with the commercialization of 5G, the application fields of radio frequency front-end chip products will be further expanded under unified standards in the future. At the same time, the value of the radio frequency front-end chip of a single smartphone under 5G will continue to rise.
Therefore, in the 5G era, as the leader in A-share radio frequency chip design, Zhuosheng Micro's growth still leaves room for the market's imagination.
04. Behind the short-term "peak" of the semiconductor market
Since the cost side is not an influencing factor, and its own growth has not changed, what is the reason for the change in market sentiment?
Coincidentally, CIS chip leader Weir Technology Co., Ltd. (603501) announced its performance forecast for the first three quarters, showing that it achieved a net profit of 3.25 billion-3.65 billion yuan in the first three quarters, a year-on-year increase of 88.32%-111.49%. The corresponding net profit attributable to the parent company in the third quarter was 1.01 billion yuan to 1.41 billion yuan, with the median value being about 1.21 billion yuan, which was basically the same as in the second quarter. On October 12, the largest intraday drop in Vail shares was close to 4%.
On the evening of October 7, the performance forecast released by Northern Huachuang (002371.SZ) showed that it is expected to achieve a net profit of 6.0 attributable to shareholders of the listed company in the first three quarters. billion to 710 million yuan, an increase of 82.30%-117.21% over the same period last year. Based on the median calculation, the net profit growth rate is approximately 100%. Among them, the profit in the third quarter is expected to be 260 million yuan to 400 million yuan, an increase of 100% to 180% over the same period last year. Compared with the second quarter, profit growth has accelerated.
Although its performance in the first three quarters was promising, the company's stock price fell. In early trading on October 8, North Huachuang fell the most by more than 7%.
Compared with the first half of the year, the growth rates of Tongfu Microelectronics , Yangjie Technology , Tongwei Shares , and Jiejie Microelectronics have also slowed down in their first three quarters performance forecasts. The common changes in the
industry show that the demand side is changing. The reply from the relevant staff of
Zhuoshengwei confirmed the observation of the 21st Century Capital Research Institute. When explaining that the company's third-quarter performance did not accelerate as before, the person said, "Due to the impact of the epidemic, the traditional off-peak season of consumer electronics is no longer applicable to the current performance, and this cyclical change is no longer so obvious."
In other words, under the influence of the epidemic, the traditional peak season for consumer electronics may not usher in the second half of the year.
A report released by IDC not long ago shows that China’s smartphone market shipped approximately 78.1 million units in the second quarter of 2021, a decrease of 11% from the same period last year. The decline in mobile phone shipments has questioned the demand prospects of chips.
As the upstream of consumer electronics, a number of semiconductor industry chain companies are "spring duck prophets".
On October 12, the semiconductor and component sectors continued to weaken. Maijie Technology fell nearly 12%, followed by Fuman Electronics, Ming Microelectronics, and Quanzhi Technology. Lin Zhi, chief analyst of
Wit Display, told 21st Century Capital Research Institute, "The stock price withdrawal in the third quarter is not only a slowdown in performance, but also the smartphone business is affected by the shortage of cores and materials. The Android mobile phone market will be greatly affected in the second half of the year. Major majors Institutions have lowered market expectations. "
Does this mean that the semiconductor market has peaked?
Lin Zhi holds a different view. He said that China's chip industry is still thriving driven by localization policies. If domestic chips can seize domestic substitution opportunities and emerging application market opportunities, they may also show a booming development trend.
21 Century Capital Research Institute believes that the reason for this round of adjustments may be that the early gains in the semiconductor sector have overdrawn the room for performance growth. Although the future development of the industry is certain, the stock price has risen too much in the early stage, and high valuation is a pressure. When the overall market style changes, it is not difficult to understand that the valuation will be reduced.
As of the close of trading on October 12, in the Wind semiconductor sector, there were 11 stocks with dynamic price-to-earning ratios of more than 200 times, and 30 stocks with dynamic price-to-earning ratios of more than 100 times.
[Produced by Nancai Think Tank·21st Century Capital Research Institute]
[Risk reminder: The stock market is risky, so you need to be cautious when entering the market. The stocks in the article are for reference only and are not intended as investment advice]
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