Suzhou Centec (688702) Ping An Securities·2024-10-28 01:12Investment Rating - The report gives a "Buy" rating for the company, indicating a positive outlook for investment [4]. Core Views - The company is a leading domestic Ethernet switch chip designer with significant potential for domestic substitution in the market [3][7]. - The company has a comprehensive product line and has successfully entered the supply chains of major domestic network equipment manufacturers [10][19]. - The growth in demand for high bandwidth due to AI applications is expected to drive upgrades in Ethernet switch chips, providing a favorable market environment for the company [8][10]. Summary by Sections Company Overview - The company, established in 2005, focuses on the research, design, and sales of Ethernet switch chips and related products, with a strong emphasis on technological innovation [19][23]. - The company went public on the Shanghai Stock Exchange in September 2023 and has a total share capital of 410 million shares, with a market capitalization of 23.3 billion yuan [3][10]. Financial Performance - The company reported a revenue of 768 million yuan in 2023, with a year-on-year growth of 67.4%. The projected revenues for 2024, 2025, and 2026 are 1.19 billion yuan, 1.53 billion yuan, and 2.11 billion yuan respectively [6][10]. - The net profit for 2023 was a loss of 20 million yuan, with projections indicating a return to profitability in 2025 with a net profit of 54 million yuan [6][10]. Research and Development - The company has significantly increased its R&D investment, reaching 224 million yuan in the first half of 2024, which is a 74% increase year-on-year, accounting for 42.11% of its revenue [7][33]. - The R&D team consists of 378 members, with 74.26% of the total workforce engaged in R&D, and over 50% of the technical staff holding master's degrees or higher [7][33]. Market Position and Opportunities - The global Ethernet switch market is expected to grow, driven by the increasing demand for high bandwidth and low latency in data centers, particularly due to AI applications [8][10]. - The company holds a 1.6% market share in the domestic commercial Ethernet switch chip market, ranking fourth, indicating substantial room for growth in domestic substitution [8][10]. Product Line and Applications - The company offers a wide range of Ethernet switch chips, covering capacities from 100 Gbps to 2.4 Tbps, and port speeds from 100M to 400G, catering to various applications including enterprise networks, carrier networks, and data centers [7][23]. - The flagship Arctic series, designed for large-scale data centers, is expected to begin small-scale deliveries in 2024, supporting a maximum port speed of 800G [10][23].