(Login to the Future Think Tank www.vzkoo.com 
Official manufacturers seek brand differentiation, consumers want to improve experience, and Internet companies are eager to explore the incremental market. The three parties jointly promote the development of smart cockpits. As the degree of intelligent and networking of cars becomes increasingly deepened, the in-vehicle entertainment information system is also developing towards an intelligent and virtualized intelligent cockpit. The intelligent cockpit integrates modules such as LCD instruments, head-up displays, central control screens, and rear-seat entertainment, and is integrated with advanced assistance (ADAS), autonomous driving, and in-vehicle communication systems. It is an important hub for human-vehicle interaction. Taking consumers' attitude towards LCD instruments as an example, according to Gaussian Automobile's survey, 62% Consumers regard LCD instruments as a consideration for buying cars, and consumers prefer LCD instruments with large screen sizes. For consumers, they are eager for more intelligent mobile control attributes.
software and hardware underlying technology (chip, algorithm , operating system) is the core of the smart cockpit industry, and the external performance is more technologically-oriented applications such as LCD instrument panels. Among them, the penetration rate of LCD instruments and HUDs is expected to increase rapidly. software and hardware underlying technology (chip, algorithm, operating system) is the core of the entire industrial process. It is applied to various intelligent components such as intelligent central control screens, LCD instrument panels, and HUDs according to different needs. Different intelligent components integrate a complete solution in the cockpit and reflect it in the form of a complete vehicle, and the vehicle is further sold to car owners. At present, the smart cockpit function is from the high-end The penetration rate of models to mid- and low-end models, among which the penetration rate of functions such as all-LCD instrument panels and HUDs is still relatively low, and is in an accelerated development trend. In the past, all-LCD instruments were mainly concentrated in luxury cars and new energy vehicles. With the rapid development of new energy vehicles and the continuous penetration of traditional cars, it is expected to reach a penetration rate of 30% in 2020. The penetration rate of central control LCD screens is relatively high, reaching more than 70%, and the penetration rate is expected to increase to 90% in 2020.
The increase in the complexity of electronic architecture has prompted the increasing value of automotive software, and it is expected that software will account for 30% of the cost of the automobile in 2030. As the electronic complexity of automobiles increases, the number of software code lines in the automobile is also increasing significantly, from tens of millions of lines in 2010 to 2016 About 150 million rows per year. According to McKinsey's report, in 2017, software can account for 10% (about US$1,200) of the entire internal structure of a D-class car or a large car, and this proportion will grow at a compound growth rate of 11% per year, reaching 30% (about US$5,200) in 2030. Currently, "software-defined cars" has become a consensus in the automotive industry, and software will account for 90% of automotive innovation in the future.
.2 Self-developed and invested to form a comprehensive software product matrix for intelligent connected cars, benefiting from the rapid growth of the intelligent cockpit market
Company is positioned as a software platform solution provider, and has formed an intelligent cockpit, automotive entertainment system, intelligent dashboard, ADAS and HMI. is positioned as a software platform technology solution provider, providing software platform and consulting design services. Starting from the operating system, it cooperates with chip manufacturers such as Qualcomm and Renesas; and cooperates with Internet companies to develop product services and applications. In the field of intelligent connected vehicles, the company has successively acquired Appsys (APPX), Finnish software company Rightware, and vision technology provider MM Solutions, forming a product matrix integrating intelligent cockpit, automotive entertainment system, intelligent dashboard, ADAS and HMI.
company's intelligent cockpit charges come from two aspects: one is to customize and develop operating systems for different car manufacturers, and the other is to obtain vehicle sales after mass production The license fee is obtained. company first develops the next generation of intelligent cockpit operating system for the car manufacturer, and then matches different models according to this generation of operating system. The charging standard mainly depends on the modules that different models need to be selected and the development volume of the car manufacturer. We estimate that the value of the next generation of intelligent cockpit operating system is about 40 million yuan, and the value of matching different models is about 10 million yuan. After the car is mass-produced, a certain license fee will be charged based on the number of IPs of the bicycle, and the value can range from a few dollars to hundreds of dollars.
We expect the compound growth rate of the smart cockpit market to reach 73.2% from 2018 to 2020. We have conducted statistics on the platforms of world-renowned automobile manufacturers and adapted models. The platform of the first generation automobile manufacturers is adapted to 9 models on average, with each model producing about 158,000 vehicles. In 2018, the global car sales were about 9.56 million, of which the penetration rate of smart cockpits is expected to be around 10%, and about 10 million cars are equipped with smart cockpit operating systems. It can be roughly estimated to have 7 platform developments and 64 models adapted. In terms of license fee income, based on a conservative estimate of 40 yuan, we estimate that the market size of the intelligent cockpit operating system in 2018 will be around 1.32 billion yuan. If the penetration rate increases to about 30% in 2020, the market size can reach 3.96 billion yuan, with an annual compound growth rate of about 73.2%.
Currently, car companies' on-board operating systems have mainly formed a competitive landscape with BlackBerry QNX as the main one, Linux (Android, Alibaba OS), and Windows CE as the second. automotive operating system can be divided into vehicle control operating system and vehicle operating system. The vehicle control system has nothing to do with vehicle physical control and is mainly used in entertainment, navigation and other fields. According to IHS statistics and forecasts, QNX currently accounts for 60% of the global in-vehicle terminal operating system market share. By 2020, QNX and Linux (including Android) will share the market share. WinCE system has been widely used in navigation and infotainment in the early years. With the advent of the era of smart cars, its performance and application number cannot meet customer needs. It has been suspended and is expected to be gradually launched in the market in the future. In addition, the company has also cooperated with Huawei, and will benefit from Huawei's series of layouts in the vehicle operating system in the future.
Company has realized "one machine, multiple screens, multiple systems" and has strong technical strength in the underlying operating system. 's latest intelligent cockpit version 3.0 can realize "one machine, multi-screen and multiple systems", that is, the digital instrument terminal runs on the QNX system, and the central control and co-driver entertainment runs on Android P. At the same time, the system performance was deeply optimized, so that the QNX system startup time is less than 3 seconds, the Android system startup time is less than 18 seconds, and the reverse image startup is less than 3 seconds. Such a layout will make the system run more stable and safe, and at the same time, it will be optimized and started quickly, showing the company's technical strength in the underlying operating system.
The company has three core competitiveness in terms of smart cockpits:
) The company has accumulated a deep accumulation of operating system experience, and the company's accumulation in Android and other fields has been transplanted to the smart car business, especially the system-level technology development capabilities. is one of the earliest companies in China to engage in Android system software development. It has formed a comprehensive technical system from hardware drivers, operating system kernels, middleware to upper-level applications in the field of smartphones. The company's accumulation and advantages in the field of Android phones have been transplanted to the smart car business, especially the system-level technology development strength.
) "One core and multiple screens" has become the development trend of smart cockpits. The company's current main customers, chip giants such as Qualcomm, are more competitive in on-board systems. is a key partner of Qualcomm in the field of automotive operating systems and has developed intelligent cockpit solutions on the Qualcomm 820A and SA8155 platforms. At present, the field of in-vehicle operating system chips can be roughly divided into two categories. One is Intel , Nvidia and Qualcomm, which can provide smart cockpit chips with higher integration and more powerful functions; the other is traditional IVI chip manufacturers, including Renesas, Freescale, etc., which mainly provide low-cost in-vehicle information and entertainment system chips, and are currently making efforts toward smart cockpit chips with higher integration. We believe that in the future, the intelligent cockpit will achieve a converged experience including multiple screens, with higher requirements on chip computing capabilities. "One-core, multiple screens" will become the development trend of the intelligent cockpit. In terms of technical capabilities alone, Intel, Nvidia and Qualcomm have better capabilities and stronger competitiveness.
) Extended mergers and acquisitions to obtain new products and customer resources, and continuously improve the industrial ecological layout. In April 2016, the company acquired two companies, Aipsin and Huichi Technology, which focused on the research and development of infotainment systems in the automotive front-mounted market, laying the foundation for the company to expand its in-car market business.In February 2017, the company acquired Finnish vehicle interactive technology company Rightware and expanded its LCD instrument panel business. Rightware's Kanzi series products are adopted by more than 30 auto manufacturers including Audi , Mercedes-Benz, Lamborghini , Jaguar Land Rover , and Kanzi tools have a market share of up to 30% of the global LCD instrument panels. In March 2018, the company acquired MM Solutions, a provider of mobile and industrial graphic image vision technology. Through the integration of technology, it launched ADAS advanced driving assistance systems such as 360-degree surround vision, obstacle detection, and driver status detection for cars. It is combined with the intelligent vision technology owned by MMS, which can complete the identification tasks of interior and exterior images and light processing, user identity, objects, and scenes. Through external mergers and acquisitions, on the one hand, the company has obtained the development, supporting technology and experience of digital instrument panels and in-vehicle entertainment information systems. On the other hand, it has also brought the company accumulating many global leading automobile manufacturers such as Volkswagen , Audi, Nissan , as well as a series of customer resources such as Hangsheng and Desai Siv, providing strong support for the rapid development of the smart car sector.
Currently, the company's automobile customer coverage reaches 80%, and the German and Japanese market revenue accounts for more than 40%. The intelligent cockpit solution is fully recognized by the market. Currently, the company's customer coverage of the automobile business has reached 80%. According to data from market research agency Focus2Move, 18 of the top 25 light vehicle companies have adopted the company's smart cockpit platform products and Kanzi® ecological products at the same time, which has added 3 new customers compared to the previous one. In the first half of 2019, the revenue of automobile customers from Japan and Germany accounted for more than 40% of the company's automobile business revenue. German cars and Japanese cars are representatives of the world-class level of the automobile industry, which means that the company's products have been fully recognized by the market.
2. The Internet of Things market is growing rapidly. The company provides AIoT integrated solution
.1. The company has leading AI vision algorithm technology, helping developers realize the acceleration of AIoT Internet of Things
AIoT industry, with a compound growth rate of the global market in the next five years as high as 26%. AIoT refers to the integration of artificial intelligence and the Internet of Things in actual applications. According to MarketsandMarkets statistics, the global AIoT market size was US$5.1 billion in 2019. By 2024, this figure will grow to US$16.2 billion, with an annual compound growth rate of 26%, of which the software solution market growth rate is much higher than that of the hardware market.
The company has the leading intelligent vision algorithm technology and deeply empowers other businesses. In the field of AI, the company has built a complete technology ecosystem from chips, operating systems, algorithms to product layers, and can provide customers with one-stop Camera solutions and AI development kits. In 2018, the company successfully acquired MM Solutions, one of the world's leading graphics and image vision technology companies, which is also the company's main competitor, further consolidated the company's leading position in smart vision technology. The company's independently developed AI algorithms, including scene recognition, face recognition, posture analysis, object recognition, defect recognition distribution, behavior analysis, etc., have been commercialized. These AI algorithms can support mainstream AI engines such as Qualcomm, ARM, and Huawei, and run smoothly on CPU, GPU, DSP, NPU and other processors. At present, the company's AI technology has deeply empowered operating systems, Internet of Things, automobiles and other businesses. In 2018, the smart vision-related revenue reached 115 million yuan, which has a strong synergy with the company's other businesses.
launches 5G AI development kit to help developers realize the interconnection of AIoT. In February this year, launched the artificial intelligence development kit equipped with Qualcomm Snapdragon X55 5G modem—the 5G version of TurboX AI Kit. The TurboX AI Kit integrates Qualcomm artificial intelligence engine, integrates Zhongke Chuangda operating system and On-Device AI technology, and builds AI applications and models such as object recognition, defect detection, scene detection, face recognition and bone recognition. TurboX AI Kit can provide AI developers with artificial intelligence computing platforms and rich development tools to quickly build product prototypes, such as smart advertising machines, smart door locks, robots, etc.
.2 provides an integrated solution, with services covering the early, middle and late stages, and the downstream consumer Internet of Things market is growing rapidly
The company focuses on consumer Internet of Things directions such as smart cameras, robots, drones, and VR, and provides an integrated solution of "core computing module SoM+operating system + algorithm + SDK". 's company's smart hardware business mainly revolves around the TurboX smart brain platform and the TurboX Cloud cloud platform, and can provide customers with integrated solutions of "core computing module SoM + operating system + algorithm + SDK". Currently, the company's products are widely used in consumer Internet of Things fields such as smart cameras, robots, drones, VR equipment and smart speakers. Typical products include Baidu smart speakers, Weijing VR equipment, Zero-degree intelligent control DOBBY drones, etc. The company's smart Internet of Things business is mainly based on commodity sales, with gross profit margins lower than those of automotive and mobile phone businesses.
TurboX aims to solve the underlying technical problems of the terminal, while TurboX Cloud focuses on providing functions such as post-stage device management, analysis, and data storage analysis. TurboX solves the underlying technical problems of terminals. The underlying technology development cycle is long and the cost is high. For the company's Internet of Things customers, adopting TurboX can reduce the cost of underlying hardware and software development, thereby completing the development of upper-level applications in the shortest time and lowest cost and putting products into the market. TurboX Cloud provides customers with services after the product is put into the market. TurboX Cloud mainly consists of four parts: device management platform, FOTA platform, application empowerment platform and data analysis platform, helping customers to perform important links such as later device management, upgrades, data storage and analysis.
Domestic sweeping robot market will continue to grow rapidly. 's main customers in the robot field are JVC, UBLY, etc. In 2017, my country's sales of sweeping robots reached 5.67 billion yuan, a year-on-year increase of 33%, and sales volume reached 3.969 million units, a year-on-year increase of 29.3%. The fast-paced life brought about by the urbanization process has reduced people's housework time. At the same time, the aging population structure has made people's rigid demand for housework robots more obvious. It is expected that the retail sales of my country's sweeping robot market will still maintain a compound growth rate of more than 20% from 2017 to 2020.
Benefiting from the continuous expansion of application scenarios, the smart camera market has grown rapidly. 's smart cameras are used in the fields of home use, automobile, intelligent monitoring, etc. According to IDC statistics, my country's smart camera shipments in 2018 were close to 9.7 million units, a year-on-year increase of 64.1%. As smart cameras become more widely integrated with other products, application scenarios will continue to expand and will continue to maintain a high growth rate in the future.
smart speakers continue to grow rapidly. As one of the carriers of AI voice interaction assistants, smart speakers undertake the "entry" function of smart homes. According to the Global Smart Speaker Market Report released by Strategy Analytics, global smart speaker shipments in Q2 2019 increased by 96% year-on-year to 30.3 million units. With the promotion of giants and the increasing recognition of smart speakers, smart speaker sales continue to maintain high growth. At present, my country is the world's largest smart speaker market, accounting for 45% of global shipments. Among them, Baidu's Xiaodu smart speaker shipped 8.8 million units in the first half of 2019, ranking among the top three smart speaker markets in the global smart speaker market together with Amazon and Google .
In summary, we believe that the company's intelligent networked hardware business will continue to grow rapidly, and as the scale expands, the gross profit margin will gradually rebound. Overall, the downstream smart cameras, robots and other markets of the company's smart hardware business will continue to develop rapidly, and VR/AR equipment is expected to bottom out and rebound this year. The company's platform attributes also ensure sufficient scalability. As the scale continues to expand, the pre-cost will continue to dilute, and the gross profit margin will gradually rise in the future. We are optimistic about the company's intelligent networked hardware business layout.
3. Increase the layout of overseas markets, and the mobile phone business is expected to usher in new growth in the 5G era
The company's smartphone business customers mainly include chip manufacturers and terminal manufacturers. In the chip field, the company can provide a full-stack operating system based on the chip base. Customers include Qualcomm, Huawei, ARM, Intel, , Spreadtrum , Samsung, Renesas, TI, etc. The revenue from chip manufacturers in the first half of this year was 172 million yuan, a year-on-year increase of 33.87%. In the terminal field, the company has a comprehensive technical system from operating system kernel, middleware to upper-level applications. Customers include Huawei, OPPO, VIVO, Xiaomi , Samsung, etc. The revenue from terminal manufacturers in the first half of this year was 256 million yuan, a year-on-year increase of 15.11%.
Company currently provides complete operating system products and design services in the Japanese and Indian markets. 's software development fully covers important links such as kernel driver integration, framework optimization, operator certification implementation, security enhancement, newly designed user interface to customization of upper-level applications. The company can provide a complete set of operating system design services for complete machine manufacturers in markets such as Japan and India, including high-end machines, flagship models, etc. In the Chinese market, the company mainly provides mobile phone manufacturers with software solutions represented by differentiated products, including system differentiation, operating system optimization, operator certification, automation testing, etc.
Benefiting from the rapid growth of the Indian market and the company's continuous strengthening of investment, the company's Indian market business will maintain rapid growth. According to IDC statistics, the shipments of Indian smartphone market in 2018 were 142 million units, a year-on-year increase of 14.5%. 2019H1 continued to maintain growth, with 69 million units shipped in the first half of the year, an increase of 8.7% year-on-year. According to data from the Pew Research Center, the penetration rate of smartphones in India was only 24% in 2018, and there is still a lot of room for improvement. At present, the company has opened an IT center in Hyderabad, India. There are about 100 people by the end of 2018. It is expected that the total number of people will reach more than 1,000 in the next 3-5 years, becoming an important overseas R&D and technical service support center for the company. The Indian branch will focus on technical research and development in the fields of smartphones, smart Internet of Things and smart cars, and has currently carried out projects with companies such as OnePlus and Qualcomm. Benefiting from the rapid growth of the Indian market and the company's continuous strengthening of investment, it is expected that the company's Indian market business will maintain rapid growth in the future.
Follow the chip giants to expand overseas, and the company's rapid service response capabilities and R&D capabilities continue to deepen cooperation. company continuously strengthens its cooperation with chip manufacturers such as Qualcomm, Intel, and Samsung by establishing overseas joint ventures and establishing joint laboratories. Specifically, since its establishment, the company has formed strategic cooperation with Qualcomm, including establishing joint ventures, joint laboratories, etc., and its cooperation areas cover multiple directions such as mobile phones, cars, IoT devices; the company has cooperated more with Intel, especially in the fields of Camera, underlying chips and wafer hardware; the scope of cooperation between the company and Samsung is also constantly expanding, and there has been in-depth cooperation in the field of IoT. By establishing subsidiaries and R&D centers in Southeast Asia, South Korea and other regions, the company further improves the service response capabilities of chip giants, and overseas markets are expected to grow rapidly in the future.
The Japanese-South Korea trade war prompted Samsung to increase investment in key areas such as chips and operating systems, and strengthen cooperation with Chinese companies. The company's revenue from Samsung is expected to grow rapidly. In July 2019, Japan launched a trade war with South Korea, restricting the export of important materials to South Korea for fluoropolimide, photoresist and hydrogen fluoride. Among them, 84.5% of fluoropolimide, 93.2% of photoresist and 41.9% of hydrogen fluoride are dependent on Japan. Therefore, Japan's restriction of exports will directly affect the development of advanced processes such as Samsung and Hynix. We believe that the Japan-South Korea trade war will lead to instability in the original industrial chain, and some Japanese and Korean companies have now considered more cooperation with Chinese companies. For Samsung, in order to avoid being choked, it is necessary to increase investment in key areas such as chips and operating systems, and at the same time find multiple partners to reduce the risk of trade war. At present, the company and Samsung are mainly in the chip field, and set up a subsidiary in Seoul in 2016 to provide technical support to Samsung. In the future, it is expected to continue to benefit from Samsung's increased investment and the reconstruction of the China-Japan-Korea technology industry chain.
As 5G mobile phones gradually become available, a new round of machine switches will usher in. The technological transformation of smartphones means that terminal manufacturers will increase their R&D investment, and the company is expected to benefit as a technology R&D enterprise. Currently, mobile terminal manufacturers such as Huawei, Samsung, Xiaomi, OPPO, vivo, and ZTE Tianji have launched 5G mobile phones one after another. According to IDC's forecast, global 5G mobile phones will begin to penetrate in 2019, with shipments of 6.7 million units and a penetration rate of 0.5%. With the 5G network gradually improving, terminal product selection increases, and price reductions, the global 5G mobile phones will accelerate penetration from 2020 to 2023, and the shipment of 5G equipment in 2023 is expected to exceed 400 million units, with a penetration rate of 26%. The changes in technology mean that terminal manufacturers will increase their R&D investment. The company's core technologies cover the 5G communication protocol stack and are the first to launch an artificial intelligence development kit equipped with Qualcomm Snapdragon X55 5G modem. It is expected to continue to benefit from the growth of 5G mobile phone shipments in the future.
4. The leader of intelligent operating systems, the three major businesses have smooth expansion and strong synergy effects
The company is a world-leading intelligent operating system product and technology provider, and the platform development strategy of "technology + ecology" is highly expanding. company is committed to providing intelligent operating system products, technologies and solutions, and its main application areas include smartphones, smart cars and smart Internet of Things. The company adheres to the "technology + ecology" platform development strategy and continues to invest in core technologies such as intelligent operating systems and artificial intelligence. Its general technology can be applied in multiple manufacturers and multiple fields, thus forming a strong scale effect. The company also provides differentiated products to form its unique core competitiveness. Secondly, by closely cooperating with chip and terminal manufacturers in the industrial chain, the company can achieve vertical integration, form a strong ecosystem, and continuously improve customer stickiness.
Endogenous extension continues to expand business areas. was founded in 2008 and started out with the intelligent system software business. It mainly covers the development and services of mobile phones, tablets, and smart TV operating systems. It has accumulated a lot of experience in the fields of Android and Linux systems. At the same time, the company has established long-term cooperative relationships with mobile chip manufacturers such as Qualcomm, Spreadtrum, and Intel. Since 2014, the company has begun to transform into smart cars and smart Internet of Things. In 2015, the company went public and successively acquired companies such as Huichi Technology, Aipx, Rightware and MMS, and established a global technical support and marketing network.
The actual controller of the company is Zhao Hongfei, general manager, who directly holds 34.09% of the company's shares. Shareholders who hold more than 5% of the shares also include Hong Kong private enterprise Yuechao Co., Ltd. There are roughly three types of subsidiaries in the company. One is a company acquired based on the company's own business needs, the other is a joint venture with important customers, such as Chongqing Chuangtong Lianda, and the other is a subsidiary located near customers overseas.
rolling equity incentives to stimulate employees' vitality. In February 2016, the company implemented an equity incentive plan, awarded 3.3059 million restricted stocks to 492 incentive targets. The performance unlocking conditions for 2016-2018 were no less than 20%/40%/60% relative to 2015; in November 2017, the equity incentive plan was again implemented, and 2.811 million restricted stocks were awarded to 210 incentive targets. The performance unlocking conditions were no less than 20%/40%/60% relative to 2016. The company's current revenue growth far exceeded the performance unlocking conditions.
In recent years, the company's revenue has maintained rapid growth, and the smart car business has performed particularly well. Company achieved operating income of 735 million yuan in the first half of 2019, a year-on-year increase of 27.15%, mainly benefiting from the rapid growth of the automobile business; in the first half of 2019, the net profit attributable to shareholders of listed companies was 88 million yuan, an increase of 44.46% over the same period last year. The growth rate higher than revenue was mainly due to the decline in expense ratio. The company's revenue compound growth rate from 2015 to 2018 was 33.55%, and its revenue has maintained rapid growth.
Smart car revenue share has increased rapidly and its gross profit margin is relatively high. 2019H1 The company's smart car business revenue was 176 million yuan, a year-on-year increase of 74.5%, and the compound growth rate from 2016 to 2018 was as high as 145.86%. The proportion of automobile business in total revenue has also increased year by year, from 5.45% in 2016 to 19.06% in 2018.In terms of gross profit margin, the company has not disclosed the gross profit margin of the automobile business, but based on the proportion of software development, technical services and software license revenue in the automobile business, the gross profit margin of the automobile business can be roughly inferred. In 2018, the company's software development and technical service revenue in the automobile business was RMB 211 million and the software licensing revenue was RMB 68 million. The gross profit margin of software licensing revenue was relatively high was 82.75%, and the gross profit margin of software development and technical service was 42.39% and 44.34% respectively. Therefore, the gross profit margin of the automobile business was approximately around 52%. Since software license revenue with high gross profit margin accounts for only 10% of the revenue in smart operating systems, the gross profit margin of smart operating systems is about 46%. In comparison, the automotive business has the highest gross profit margin among the company's three major sectors.
Smart hardware business revenue growth rate is relatively fast, with a gross profit margin of about 20% in 2018. 's smart Internet of Things business has also maintained rapid growth in recent years. The company's smart Internet of Things revenue in 2019 was 103 million yuan, a year-on-year increase of 22.5%. The compound growth rate in 2016-2018 was as high as 62.05%, and the proportion of total revenue also increased from 15.1% in 2016 to 22.9% in 2018. The company's smart Internet of Things business model is mainly based on commodity sales. In addition to providing SoM core boards with universal functions to channel customers, the company also provides differentiated products to customers in segmented fields, including robots, smart cameras, wearable devices, VR/AR, etc. The proportion of intelligent IoT business hardware is relatively high, and its gross profit margin is relatively low. The gross profit margin in 2018 was about 20%, an increase of nearly 10pct compared with 2017. We believe that as shipments increase in the future, the cost of pre-stock will continue to dilute, and the gross profit margin is expected to increase in the future.
sales gross profit margin remained basically stable, and due to the increase in marketing costs, sales expenses have increased. in the last three years and the first period, the company's gross sales interest rates were 46.42%, 36.38%, 41.71% and 41.07%, respectively. Overall, the company's gross profit margin remained basically stable. In 2019H1, the company's sales expense rate was 6.35%, an increase of 0.42pct year-on-year, mainly due to the significant increase in marketing expenses; the management expense rate was 12.74%, a decrease of 2.39pct year-on-year, among which the daily office expenses decreased significantly; the financial expense rate was 1.26%, a decrease of 0.25pct year-on-year, and the company's interest expenses decreased; the R&D expenses/total revenue was 11.33%, a decrease of 1.41pct year-on-year, mainly due to the decline in equity incentive expenses and office expenses. Overall, the company's expense ratio during the 2019H1 period was 31.67%, a year-on-year decrease of 3.63pct. After excluding the impact of equity incentive expenses, the company's expense ratio continued to decline by 1.09pct year-on-year. The company's expense control capabilities continued to enhance, so the net sales profit margin also rebounded.
is dominated by technology and maintains high investment in R&D for a long time. has more than 1,000 independently developed technology patents and software copyrights. As of June 2019, it had about 3,800 employees worldwide, of which nearly 90% of them were R&D personnel. As a technology company, in order to maintain the long-term core competitiveness of the company, the company's R&D expenditure was relatively high. In 2018, the company's R&D expenditure reached 280 million yuan, a year-on-year increase of 93.7%, mainly due to the increase in R&D investment in smart car business-related projects.
5. Profit forecast and investment advice: Be optimistic about the medium- and long-term development prospects, give buy rating
Intelligent operating system business: benefited from the high growth in the Indian and Korean markets in the next two years, as well as the promotion brought by the 5G replacement wave in the Japanese and Chinese markets. It is expected that the company's smart operating system business revenue will achieve a growth of 15%/15%/15% from 2019 to 2021.
Smart Internet of Things hardware business: company's smart hardware business downstream smart cameras, robots, smart speakers and other markets will continue to develop rapidly, and VR/AR devices are expected to gradually rebound this year. The company's platform attributes also ensure sufficient scalability. As the scale continues to expand, the pre-investment costs will continue to dilute, and the gross profit margin will gradually rebound in the future. Therefore, it is expected that the company's smart IoT hardware business revenue will grow by 20%/20%/20% from 2019 to 2021, and the gross profit margin will be increased.
Intelligent connected car business: With the continuous increase in the penetration rate of intelligent and connected new cars on the market, the value of intelligent cockpit bicycles continues to increase, and the intelligent cockpit industry will maintain a high growth rate of more than 70%. The company has strong automotive software products and systems, rich experience in operating system development, and continuously enhances the company's automotive business strength through external mergers and acquisitions, which is fully recognized by mainstream car manufacturers around the world. As the number of company customers increases in the next few years, and cars equipped with smart cockpits and existing customers of the company are gradually mass-producing, it is expected that the company's development and licensing costs will continue to maintain high growth. Therefore, it is expected that the company's intelligent connected vehicle business revenue will achieve an increase of 80%/60%/60% from 2019 to 2021.
Investment advice: originated from years of research and development and innovation in operating system technologies such as Android, Linux, Windows and . Zhongke Chuangda has formed a comprehensive technical system from hardware drivers, operating system kernels, middleware to upper-level applications, accumulated rich R&D experience and formed a rich system-level product. The company's core technologies cover communication protocol stack, deep learning, graphical and image algorithms, operating system optimization and security technology. Zhongke Chuangda has a close cooperative relationship with global leading companies such as chips, components, terminals, software and Internet manufacturers and operators in the smart terminal industry chain. It has an international professional team with a deep understanding of operating system technology. It is the global core software partner of the global leading chip companies and mobile phone companies. In the next three years, the company will benefit from the rapid growth of the terminal-side markets, as well as the continued high growth of the intelligent network automobile and consumer Internet of Things sectors. It is conservatively expected that the company's net profit attributable to shareholders from 2019 to 2021 will be RMB 230 million, RMB 30 million, and RMB 400 million, respectively. The corresponding EPS from 2020 to 2020 will be RMB 0.57, RMB 0.75 and RMB 0.99 respectively, corresponding to the current stock price PE of 72, 55 and 41 times. As the core software target of the 5G sector, we continue to be optimistic and recommend it in the long run, and maintain the buy rating.
(Report source: CITIC Construction Securities)
Log in to the Future Think Tank www.vzkoo.com to get high-end reports.
Experience now, please click: "Link"
