After the tightening of the IPO policy, many enterprises gradually entered a "cooling-off period" for financing. Brite (688691. SH) successfully landed on the Science and Technology Innovation Board on April 11, not only withstanding the test of the capital market, but also opening its stock price all the way up, with a gratifying upward trend.
On the evening of April 19, the company disclosed the first quarter report, achieving a total operating income of 340 million yuan, a net profit attributable to the parent company of 55.6938 million yuan, and a non-net profit of 51.351 million yuan, continuing to maintain a steady development trend, showing the resilience of Brite through the cycle.
Behind this is the result of its continuous R&D and innovation to consolidate technical barriers. After continuously investing nearly 300 million yuan in R&D expenses in the past four years, Brite continued to maintain a growth rate of nearly 50% in R&D investment in the first quarter of this year, and the R&D expense ratio also increased year-on-year.
In the future, the development of the domestic semiconductor industry and the promotion of downstream emerging industry technologies will bring unprecedented opportunities for the long-term development of local chip design service enterprises represented by Brite.
Continue to operate steadily through the cycle, escorting the "price protection" of market value flexibility
Founded in 2008, Brite focuses on providing customers with one-stop chip customization services. On April 11, Brite was officially listed on the Science and Technology Innovation Board, and its debut performance was outstanding.
As of the close of the day, Brite shares closed at 49.7 yuan, an increase of 150.3%, with a total turnover of 938 million yuan throughout the day, with a turnover rate of 75.15%, and active trading. At the time of the sharp rise in stock prices, the total market value of Brite shares also rose, approaching 6 billion yuan.
Since the pace of IPOs has been tightened in stages, a number of companies planning to IPO in the capital market have withdrawn their applications for issuance and listing, which has also made the number of listed companies scarce. This year, in addition to Brite shares, only Shengjing Micro (603375. SH) listed on A-shares, with a first-day gain of 54.4%.
Brite's competitive advantage in the secondary market is also reflected in its low price-earnings ratio. The initial price of Brite shares was RMB19.86 per share, and the issue price-to-earnings ratio (earnings per share calculated based on the audited net profit attributable to shareholders of the parent company before and after deducting non-recurring gains and losses in 2022 divided by the total share capital after the issuance) was 25.12 times. As of March 26, 2024 (T-3), the average static P/E ratio of the software and information technology services industry (I65) released by China Securities Index Co., Ltd. in the latest month was 53.5 times, and the valuation of Brite shares was significantly undervalued. Low-priced new shares are more conducive to bringing more profit opportunities to investors at the beginning of listing. Based on the closing price, Zhongyi Brite shares can make a profit of 14,900 yuan.
Behind it, steady performance is the confidence. Since 2022, the global semiconductor industry has been hit by various factors such as a downward cycle and an unstable trade environment. Compared with many peers facing profitability difficulties, Brite has shown resilience in the industry cycle.
According to the data, from 2020 to 2022, Brite Co., Ltd.'s revenue was 506 million yuan, 955 million yuan and 1.303 billion yuan respectively, with a compound growth rate of 60.42%, the net profit attributable to the parent company was 18 million yuan, 44 million yuan and 95 million yuan respectively, and the compound growth rate of net profit attributable to the parent company was 273.91%. In 2023, Brite's operating income increased by 2.99% year-on-year, and net profit attributable to the parent company increased by 79.70% year-on-year. In the first quarter of 2024, it will continue to maintain steady development, which will escort the market value elasticity of Brite shares.
R&D and innovation consolidate technical barriers, and differentiated competition widens the moat
Brite Co., Ltd. was awarded the title of "Little Giant" Enterprise at the National Level. This honor is not only a recognition of the company's technical strength, but also an affirmation of its market competitiveness and industry influence.
With the continuous improvement of the downstream application market's requirements for chip performance, power consumption, integration and compatibility, chip design risks, development costs and development cycles continue to rise, which makes customers pay great attention to their design efficiency and product performance when choosing chip design providers.
Since its establishment, Brite has been deeply engaged in the research of different manufacturing processes, has been committed to providing customers with high-quality and reliable one-stop chip customization services, and has independently developed a series of high-performance IP (YouIP), based on which a series of reusable industry SoC solutions have been formed, and finally established a mature and expanding system-on-chip design platform (YouSiP). With the help of this platform, the company can quickly realize differentiated design according to customer customization needs, which greatly improves the company's chip design efficiency and reduces the risk of project design and mass production, forming a high competitive barrier. Over the years, the company has continuously met the localization needs of downstream customers by combining different process nodes, IP characteristics and customer differentiation needs, and has provided high-quality and reliable customized services for domestic enterprises with important industrial influence in the fields of Internet of Things, industrial control, consumer electronics, network communications, high-performance computing, and smart cities.
Brite has also continued to expand its overseas customers, built an international brand with Chinese design, and won the recognition of many well-known foreign customers in the fields of energy and industrial control.
The analysis points out that Brite's advantages in market competition are reflected in its mastery of advanced technology and deep understanding of complex system-on-chip design. This is all thanks to the emphasis on scientific and technological innovation and continuous investment in research and development.
From 2020 to 2023, Brite's R&D expenses will be 39.1547 million yuan, 65.9862 million yuan, 85.2281 million yuan and 108.2287 million yuan respectively, and the cumulative investment in R&D expenses will be nearly 300 million yuan. In the first quarter of this year, Brite continued to maintain a high investment in R&D, and the R&D expenses in Q1 2024 were about 30.4238 million yuan, a year-on-year increase of 47.23%, accounting for 8.93% of operating income, an increase of 3.04 percentage points.
High investment in exchange for high returns. As of June 30, 2023, Brite and its subsidiaries have 85 patents, including 48 invention patents and 37 utility model patents, 21 computer software copyrights and 16 exclusive rights for integrated circuit layout design, forming the company's core competitiveness.
As the upstream link of the industrial value chain, the integrated circuit design industry is a knowledge-intensive industry, which has high requirements for the number and professional level of innovative talents. As of June 30, 2023, the company has 96 R&D personnel, accounting for 35.29% of the company's total employees.
The future market prospects of the industry are good, and the business scale is expected to increase rapidly
The integrated circuit design service industry is still in a stage of vigorous growth. According to the research of the Shanghai Integrated Circuit Industry Association, with the vigorous development of global data centers, intelligent Internet of Things devices and other fields, the demand for design services from chip design companies and system manufacturers is expected to rise.
According to the data, the global integrated circuit design service market size will be about 19.3 billion yuan in 2021, with an average annual compound growth rate of about 10.6% since 2016. With the increasing demand for design services, the global integrated circuit design service market is expected to reach 28.3 billion yuan by 2026.
After years of development, Chinese mainland has become the world's largest electronic equipment production base and the world's largest integrated circuit market. Industry insiders believe that under the traction of huge market demand and localization demand, local integrated circuit enterprises in mainland China have ushered in unprecedented development opportunities. At the same time, the continuous improvement of the professional and technical level of local enterprises in chip design, wafer manufacturing, packaging and testing has further promoted the development of China's integrated circuit industry.
In the future, with the rise of the Internet of Things, artificial intelligence, intelligent hardware, 5G and other fields, the demand for high-end chips will continue to grow, which will further stimulate the sustainable development of the mainland integrated circuit industry and the migration of the global integrated circuit industry chain.
As a leading enterprise in the industry, Brite has successfully taped out at a number of key technology nodes, as well as strategic cooperation with well-known wafer foundries such as SMIC, which not only ensures the company's competitiveness in advanced technology, but also opens up a broader market space for the company.
According to Brite's strategic development plan, the company will further expand the coverage of its sales and service network, enhance its customer service capabilities, further increase R&D investment, enhance its independent innovation capabilities, and continue to deepen its existing all-round technical service system with large-scale SoC custom design technology and semiconductor IP development technology as the core. In the opportunity of localization development, Brite will also use policy tools such as diversified financing in the capital market to help customers complete the definition, design and mass production and shipment of chips with higher efficiency and higher quality, and promote industrial upgrading and progress. (This article was first published on Titanium Media APP)