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A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Author / Pot-wrapped meat under the stars

Edit/Spinach's Starry Sky

Typesetting/Cinnamon rolls under the stars

In the first two trading days after the eleventh day, the market pulled back. In a green stock, semiconductors are particularly conspicuous. Typical enterprises, such as National Technology (300077), have successively pulled up the 20cm limit.

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Source: Straight Flush - National Technology (as of October 11, 2024)

National Technology is an integrated circuit design enterprise, and Shanghai Belling (600171) is a peer. However, this rally is much more ferocious than that of Shanghai Belling (of course, the subsequent decline is not soft at all).

However, from the perspective of performance, in the first half of 2024, Shanghai Belling will achieve a net profit of 131 million attributable to the parent company, while National Technology is still in a state of loss.

Therefore, what is the support behind the rising stock price of National Technology?

First, the semiconductor industry is picking up and its performance is recovering

One of the highlights of National Technology is the cooperation with IBM to jointly create an EDA (electronic design automation) cloud platform. However, before that, National Technology has explained that the company purchased the EDA cloud platform from IBM, which is mainly used for the company's chip research and development, and does not belong to cooperative construction.

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Source: Interactive Q&A Platform - National Technology

Back to the chip design, National Technology and Shanghai Belling have similar business models, both of which adopt the Fabless asset-light business model. That is, the company is engaged in the R&D, design and sales of integrated circuit products, and outsources wafer manufacturing, packaging and testing business to specialized wafer manufacturing and packaging and testing manufacturers.

Specifically, Shanghai Belling's integrated circuit product business focuses on the field of analog integrated circuit products, and the company's products cover three major product areas: power management, signal chain products and power devices. The downstream is mainly used in six major market fields, including automotive electronics, energy efficiency monitoring, industrial control energy storage, network communication, major appliances, and intelligent terminals.

National Technology mainly focuses on "general + security" products, focusing on the four core areas of SoC (system-on-chip), information security, power management, and radio frequency. The downstream covers many fields such as automotive electronics, smart home, industrial control, Internet of Things, consumer electronics, medical electronics, and biometrics.

In 2023, affected by terminal demand, the global semiconductor industry will have a downward cycle, and it will generally be in the stage of destocking, and market competition, especially price competition, will intensify. This year, Shanghai Belling lost 60.2198 million, and National Technology lost 572 million.

However, in 2024, with the weak recovery of the global economy, the terminal demand of the semiconductor industry will recover moderately, and the inventory on the channel side will gradually deplete. In addition, emerging markets such as artificial intelligence, intelligent networked vehicles, cloud computing, and the Internet of Things have also brought incremental space to the semiconductor market. The semiconductor industry is showing a warming trend.

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Source: Data for the first half of 2024, the national technology profit data is the company's overall profit

The data shows that in the first half of 2024, the technical performance of Shanghai Belling and National will be significantly restored. Shanghai Belling's revenue increased by 27.20% year-on-year, and its net profit turned into a profit. Although the national technology is still losing money, the revenue of integrated circuits and key components rose by 47.82% year-on-year.

Second, the anode material industry is under pressure and competition is intensifying

Obviously, the semiconductor industry has rebounded significantly after the adjustment in the first two years. However, it is still an indisputable fact that the overall demand of the traditional consumer electronics market such as domestic home appliances is insufficient, and the competition in the automotive electronics market is intensifying.

For Shanghai Belling and National Technology, it is still a big challenge to continue to maintain a strong growth rate.

In addition, in the integrated circuit business, thanks to the smaller scale, the national technology has shown greater growth elasticity than Shanghai Belling. However, 43.73% of the income of national technology comes from anode materials.

And this business is not optimistic at the moment.

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Source: Straight Flush - National Technology for the first half of 2024 data

National Technology is mainly engaged in the research and development, production and sales of lithium-ion battery anode materials, as well as graphitization processing services. Among them, graphitization process is one of the core process links in the production process of lithium-ion battery anode materials. Anode materials are mainly used in the field of lithium batteries.

In the first half of 2024, the lithium-ion battery market will continue to grow, albeit at a slower pace. According to the research and statistics of the Advanced Industry Research Institute (GGII), in the first half of 2024, domestic lithium battery shipments will be 459GWh, a year-on-year increase of 21%, compared with a growth rate of 36% in the same period last year.

In addition, although the domestic lithium battery anode material industry is still showing a growth trend, it is also facing challenges such as structural overcapacity and intensified market competition.

At present, the expansion of production capacity of enterprises in the anode industry in the early stage has entered the release period, coupled with the decline in the growth rate of power and energy storage batteries, the anode material industry is facing greater pressure on capacity consumption. In the short term, the entire industry has overcapacity, the price of anode materials is under pressure, and market competition is intensifying.

Reflected in the performance, in the first half of 2024, the revenue of national technical anode materials will be 225 million, a year-on-year decrease of 14.04%. In addition, the gross profit margin is only 3.09%, and the profit is worrying.

Third, the cost remains high, and the profit is worrying

On the whole, although the performance of the integrated circuit sector has been restored, the performance of national technology is not so ideal.

In the first half of 2024, the gross profit margin and net profit margin of Shanghai Belling will be 29.12% and 11.81% respectively. The gross profit margin of national technology is only 20.06%, and the net profit margin is even more miserable, reaching -28.81%.

The serious loss of national technology's net profit is not only hindered by the gross profit margin of anode materials, but also closely related to the company's higher expenses.

First of all, both National Technology and Shanghai Belling have high R&D expenses. In the first half of 2024, the R&D expense ratios of the two will be 19.54% and 15.96% respectively. For chip design companies, this is an expense that cannot be saved.

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Source: Data for the first half of 2024

But the difference is that in addition to the high R&D expenses, Shanghai Belling does not have many other expenses. In the first half of 2024, the combined expense ratio of its three expense ratios is only 4.52%.

On the other hand, the national technology has a management expense rate of 19.68% alone, which even exceeds the R&D expenses. Among them, equity incentive expenses have made the largest "contribution".

However, on the other hand, when the equity incentive ends, there is still some room for management expenses to fall.

A little red in the green bushes! What is the support behind the sharp rise in semiconductors?

Source: National Technology 2024 semi-annual report

In contrast, financial expenses are pure rigid expenses.

In theory, chip design is an asset-light industry. Referring to Shanghai Belling, its asset-liability ratio is only 13.13%. However, the problem is that there is still a part of the anode material business that requires high investment. Judging from the data, as of mid-2024, the total number of fixed assets + projects under construction in Shanghai Belling is only 100 million+, while the total national technology has exceeded 1 billion.

At the same time, the national technology is still in the red, and the hematopoietic capacity is limited. Taken together, as of mid-2024, the asset-liability ratio of national technology has reached 69.11%, and the financial expense ratio has reached 6.64%.

Overall, the gross profit margin of national technology is low and the expense ratio is high. In the first half of 2024, although the semiconductor industry as a whole will recover, profitability will still be a major difficulty for national technology.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.