EMPYREAN(301269) Guotai Junan Securities·2024-10-30 07:00Investment Rating - The report initiates coverage with a "Buy" rating for the company, Huada Jiutian, with a target price of 120.32 CNY [4][23]. Core Views - Huada Jiutian is recognized as the leading domestic EDA (Electronic Design Automation) vendor, benefiting from significant competitive advantages. The rapid development of China's integrated circuit industry and the acceleration of domestic substitution are expected to drive the company's growth beyond market expectations [2][4]. - The company has a clear strategic plan aiming for comprehensive coverage of EDA tools across all fields of integrated circuit design and manufacturing by 2030, supporting domestic autonomy [4][12]. Financial Summary - Revenue is projected to grow from 1.01 billion CNY in 2023 to 2.12 billion CNY by 2026, with annual growth rates of 26.6%, 29.9%, 28.1%, and 26.2% respectively [3][16]. - Net profit attributable to the parent company is expected to fluctuate, with estimates of 201 million CNY in 2023, dropping to 133 million CNY in 2024, and then rising to 332 million CNY by 2026 [3][16]. - Earnings per share (EPS) are forecasted to be 0.37 CNY in 2023, 0.25 CNY in 2024, and increasing to 0.61 CNY by 2026 [3][16]. Industry Overview - The EDA industry is experiencing high demand, with domestic substitution expected to accelerate due to increasing importance of self-sufficiency amid external risks. The Chinese EDA market is growing faster than the global average, although dominated by three international giants [4][12]. - The company is positioned in the second tier of the market but has significant growth potential due to the low base of market share and the ongoing trend of domestic substitution [4][12]. Competitive Advantages - Huada Jiutian has established a strong "moat" through its comprehensive product offerings, talent pool, and customer relationships. The company covers seven major fields with full-process tools in four areas, enhancing its competitive edge [4][25][27]. - The company has a robust talent acquisition strategy, including partnerships with educational institutions and stock incentives to retain key personnel [4][29]. Valuation - The report employs both PS (Price to Sales) and PB (Price to Book) valuation methods, arriving at a target price of 120.32 CNY based on an average of the two methods [20][22][23].