Arm plc(ARM) 国泰君安·2024-09-16 08:38Investment Rating and Core Views - The report assigns an "Overweight" rating to Arm (ARM O) based on its strong position in the AI era and its potential for revenue growth driven by its CSS model and royalty income [2][3] - Arm is expected to benefit from the expansion of downstream market demand and the increase in royalty rates, with projected revenues of $3 98B $4 86B and $6 05B for FY2025E FY2026E and FY2027E respectively [4] - The company's target market value for 2025 is estimated at $162 95B with a target price of $154 [4] Revenue and Profit Forecasts - Arm's revenue is expected to grow at a CAGR of 23% from FY2025E to FY2027E driven by both licensing and royalty income [4] - Non GAAP net profits are projected to be $1 53B $1 81B and $2 38B for FY2025E FY2026E and FY2027E respectively [4] - The company's royalty income is expected to grow at a double digit rate supported by diversified customer base and market applications [11] Market Position and Competitive Advantages - Arm dominates the smartphone market with a 99% market share and 40% of its royalty income coming from this segment [4] - The company's energy efficiency advantage is highlighted as a key factor in its success in mobile and AI PC markets with Arm based chips consuming 30% less power than x86 chips [4] - Arm's CSS model is expected to drive higher royalty rates and market penetration in data centers and automotive electronics [4] Licensing and Royalty Income Breakdown - Licensing income is expected to grow due to the shift towards subscription based models (ATA and AFA) with projected licensing revenues of $1 79B $2 23B and $2 76B for FY2025E FY2026E and FY2027E respectively [9] - Royalty income is driven by the adoption of Arm v9 architecture and the expansion of AI enabled devices with smartphone royalty income expected to grow at an 18% CAGR from FY2024 to FY2027 [10] Growth Drivers in Key Markets - Smartphones: AI driven smartphone upgrades and the adoption of Arm v9 architecture are expected to boost royalty income [10] - AI PCs: Arm's energy efficiency is seen as a key advantage in the AI PC market with market share expected to grow from 14% to 25% by 2027 [13] - Data Centers: Arm's market share in cloud computing is expected to grow driven by partnerships with AWS Microsoft and others [14] - Automotive: The rise of electric vehicles and autonomous driving is expected to drive a 30% CAGR in automotive royalty income from FY2024 to FY2027 [15] Valuation and Financial Metrics - The report uses a DCF valuation method with a WACC of 13 2% and a perpetual growth rate of 5% to arrive at a target market value of $162 95B for 2025 [17][19] - Arm's forward P/E for FY2025 is estimated at 105x with a target price of $151 based on its growth prospects and market position [21]