Zhaoyi Innovation (603986) 2019 Interim Report Review: Exceeding expectations NORFLASH market recovery performance turning point appears

Zhaoyi Innovation (603986) 2019 Interim Report Review: Exceeding expectations NORFLASH market recovery performance turning point appears

In the second quarter of 2019, the company’s performance exceeded expectations, the inflection point appeared, and the subsequent sales of products such as NOR Flash benefited. The expected performance is expected to continue.

The company is a domestic manufacturer of high-quality memory chips, MCUs, and under-screen fingerprints. It is an important domestic memory platform in the medium and long term. R & D continues to grow and deserves special attention.

We predict 2019?
The EPS in 2021 is 1.



07 yuan, maintain “Buy” rating.

The performance exceeded expectations, and the turning point in 2019Q2 appeared.

The company’s 2019H1 revenue is 12.

20,000 yuan, ten years +8.

63%; net profit attributable to mother 1.

870,000 yuan, at least -20.

24%; deduct non-net profit 1.

59 trillion, a year -27.

39%; The net profit given by the quarterly results exceeding the expected index of more than -50% per year.

In the single quarter, 2019Q2 performed strongly, with revenue of 7.

4.6 billion, +31 from previous / mom.

98% / + 63.

41%, net profit attributable to mother 1.

4.8 billion, previous / mom +1 respectively.

43% / + 272.

56%; and 2019Q1 revenue / attribution net profit twice -15.

73% /-55.

84%, showing a strong turning point in the second quarter, mainly benefited from NOR Flash demand, prices rebounded, the third quarter is a traditional peak season, and is expected to maintain a strong trend.

The company’s 2019Q2 sales / management / R & D / financial expense ratios were -0.

33 points / -0.

45pct / +2.

96 pieces / + 2.

32pcts, overall cost rate +4.

50 cases; gross margin / net margin were 37.

47% / 19.

82% every year -0.

06pct / -5.


Core businesses such as storage and MCU are actively explored to benefit from increased market demand + increased market share.

In terms of business: 1) In terms of NORFlash, it has benefited from the incremental outbreak of the TWS market.

We expect the TWS wireless headset market to expand to 90 million / 1 in 2019/2020.

500 million pairs, respectively +125% / + 70%, including 55 million / 80 million pairs of customers, Android and other 35 million / 70 million pairs.
The company launched the industry’s smallest packaged low-power product line to provide customers with Airpods. The Android side and related main chip manufacturers cooperate to expand Huawei and other manufacturers.
It is expected that 55nm products will be launched within the year to further reduce costs.

According to Web-FeetResearch, the company ranked No. 5 globally in 2018 with a market share of 10.

9%, ten years +0.

4pct, second only to Wanghong, Winbond, Cypress and Micron.

For NANDFlash, 38nm SLC has been in mass production and will further promote 24nm products.

2) The microcontroller (MCU) successfully developed the world’s first RISC-V architecture MCUGD32V series, which covers the fields of the Internet of Things, industrial control, and intelligent terminals.

The company will launch new series of wireless MCU, power management chip and so on.

According to IHS Markit, the company ranks third in the Chinese MCU market with a market share of 9.

4%, ten years +3.

4pcts, second only to STMicroelectronics and NXP.

3) Silicom started consolidation in June 2019. It is expected that the under-screen fingerprint chip will expand smoothly at Huawei. The expansion volume in the fourth quarter is expected to exceed 6 million, and more than 15 million.

The company has also made progress in the development of large-area TFT products and MEMS ultrasonic fingerprint sensors.

R & D investment continues to increase, and vigorously promote the industrialization of DRAM.

2019H1 company R & D expenses1.

4 trillion, +74 a year.


In 2019H1, the company filed 129 new patents, obtained 67 new domestic patents, and 7 US patents.

On April 26, the company signed a convertible stock debt investment agreement with Hefei Changxin and Hefei Industry Investment, investing 300 million US dollars in DRAM projects.

The company continues to promote DRAM projects and enter the mainstream memory chip market. The long-term catalytic replacement of domestically produced storage is of great significance and opens up a lot of development space.

Risk factors.

DRAM and other product development risks; market development risks; market potential risks.

Earnings forecast, estimation and investment grade: The company is a domestic high-quality company with coexisting storage chips, MCUs, and under-screen fingerprint recognition design capabilities. The DRAM project has opened up hundreds of billions of medium and long-term space.

As the company’s second-quarter performance exceeded expectations, we raised the company’s EPS forecast for 2019/20/21 to 1.



07 yuan (corresponding to the first 2 equity changes.



45 yuan, adjusted before the preparation of Siliwei and prepared for EPS1.



84 yuan).

It is given 56 times PE in 2020, corresponding to a target price of 147.

28 yuan, maintain “Buy” rating.