As the leading intelligent network core software and hardware supplier in China, the performance of Desay SV also reflects the market trend to a certain extent, and also highlights the fierce competition in different segments of the track.
According to the semi-annual report data, from January to June 2023, Desay SV achieved operating income of 8.724 billion yuan, a year-on-year increase of 36.16%; net profit attributable to shareholders of listed companies was 607 million yuan, a year-on-year increase of 16.47%.
The screenshot is from the public information of Desay SV’s 2023 semi-annual report
Judging from the comparison of semi-annual report data from 2021 to 2023, the first half of this year is the trough of the year-on-year growth data of Desay SV's revenue and profit. Among them, the revenue growth rate fell from 57.25% in H1 2021 (compared to H1 in 2020) to 36.16%.
The growth rate of net profit has dropped from 61.01% in H1 of 2021 to 16.47%. At the same time, the growth rate of main business costs (42.13%) is higher than the growth rate of revenue (36.16%). Intense), the number of projects under research increased (R&D investment increased by 56.20% year-on-year).
In Desay SV's view, with the further deepening of industry reform and integration, market competition has become more intense, and has evolved from single-capability competition to systematic competition, which puts forward higher requirements for the comprehensive strength of enterprises.
For example, open up greater development space through internationalization, accelerate the construction and expansion of overseas R&D and manufacturing bases, and invest more resources to develop international business;
Among them, as a component of research and development expenses, the year-on-year growth rate of business entertainment expenses in the first half of this year reached 67.04%, and the year-on-year growth rate of employee salary expenses was close to 60% (58.43%).
This also further highlights that the intelligent network league channel is still in a continuous high R&D investment cycle, while the terminal market is affected by factors such as upstream procurement costs, car companies' cost reduction, and peer pressure.
Among them, in terms of new products, the company's fourth-generation smart cockpit domain controller has received multiple project orders, and more differentiated cockpit domain control solutions and new products such as body domain controller, AR HUD, and electronic rearview mirrors have been launched successively .
In the smart driving part, in addition to the high-end smart driving domain controller, the lightweight, cost-effective smart driving assistance solution has won multiple project designations and will soon be mass-produced. In addition, the cabin driving fusion domain controller (central computing platform) product has been designated as a project.
From the perspective of business sector, as the traditional main business of Desay SV, the proportion of smart cockpit revenue has dropped from 89.19% in H1 of 2020 to 71.65%. In the first half of this year, the growth rate of cockpit revenue was only 18.57% (the gross profit margin of products continued to decline), which was significantly lower than the growth rate of 40-50% in the past two years.
On the one hand, the intelligentization of the cockpit, especially at the hardware level, is in the alternating cycle of new and old solutions. Traditional large-scale entertainment hosts have entered a low-speed growth cycle, while domain controllers still lack economies of scale.
According to the monitoring data of Gaogong Intelligent Automobile Research Institute, from January to June 2023 in the Chinese market (excluding imports and exports), the delivery of new vehicles equipped with central control entertainment system for pre-installation of passenger cars will only increase by 8.17% year-on-year.
However, the delivery of cockpit domain controllers still maintained rapid growth , with a year-on-year increase of 67.84%, but the total volume in the first half of the year was less than 1.2 million units. At the same time, supplier competition is becoming increasingly fierce.
The picture comes from the research of Gaogong Intelligent Vehicle Research Institute
For example, in the traditional central console market, Desay SV's supply to Toyota (a major customer) has begun to be challenged by Hangsheng. Sales of traditional major customers, including Volkswagen and Great Wall, have not performed well.
In the domain controller market, several manufacturers such as IoV (Bosch), PATEO, Neusoft, and Nobo Technology are also forming a situation of squeezing the market. In addition, as one of the main customers of Desay SV's third-generation smart cockpit domain controller, Chery is also supporting Mediabrands, which has a stake in it.
At the same time, in the part of display assembly with higher profit, for traditional suppliers like Desay SV, on the one hand, they benefit from the new opportunities brought by domain controllers, such as from single-screen central control to dual-screen , triple screen, etc. In the past, LCD instruments and central control were mostly two different suppliers.
On the other hand, the separation of screens and hosts has also allowed traditional upstream display LCD panel suppliers to "step into" the market. For example, as the in-vehicle business platform of BOE Group, BOE Veritas continues to develop the smart cockpit business, and directly delivers display screen assemblies to downstream car factory customers.
In addition, the competition in the display assembly market is also fierce.
For example, in order to cater to the trend of "big screen and multi-screen", Hua'an Xinchuang, a listed vehicle display solution company, has transformed from a Tier 2 to Tier 1, and has successively established joint ventures with BOE and Shenzhen Tianma. However, performance was not ideal.
The 2022 annual report shows that the company's operating income was 890 million yuan, a year-on-year increase of 22.83%. However, the net profit attributable to shareholders of listed companies decreased by 14.65% year-on-year, and the gross profit margin was only 13.41%.
In the first quarter of 2023, the company achieved a main operating income of 302 million yuan, a year-on-year increase of 84.27%; net profit attributable to the parent was 5.7614 million yuan, a year-on-year increase of only 5.16%; non-net profit deduction was 3.1684 million yuan, a year-on-year decrease of 8.94%.
At the same time, some instrument manufacturers are also competing for the dual/multi-screen market with higher gross profit margins. For example, Tianyouwei, which has disclosed its IPO prospectus, has a gross profit margin of only 18.94% for traditional instrument clusters in 2022, while that for dual screens is as high as 37.63%.
This means that Desay SV needs to continue to expand the cockpit product line , such as the full-scenario smart blue whale ecosystem (OS customization + application development), smart electronic rearview mirror, OTA, digital key, etc.
At this year's Shanghai Auto Show, Desay SV released the Smart Solution 2.0 smart travel solution, one of the highlights is the AR HUD. Behind this is Desay SV's strategic investment of tens of millions of yuan in Chiyun Technology.
Chiyun Technology received angel round financing as early as 2015. The founder Wang Yunfan is a post-90s generation. He mainly promoted after-installation HUD in the early stage, and turned to the pre-installation market a few years later. However, compared to several peers such as Huayang, Zejing, Crystal Optoelectronics and FUTURUS, Chiyun Technology's performance is mediocre.
Data shows that Desay SV’s investment of RMB 30 million in Chiyun Technology has confirmed investment gains and losses (- RMB 165,454.61) in the financial report for the first half of this year. However, the HUD market cannot be underestimated.
According to the monitoring data of Gaogong Intelligent Vehicle Research Institute, from January to June 2023 in the Chinese market (excluding imports and exports) the delivery of standard W/AR HUD for passenger cars is 904,900 units, a year-on-year increase of 50.62%; more than 55 models provide The standard or optional configuration of W/AR HUD further highlights potential incremental opportunities.
While investing in Chiyun Technology, Desay SV is also leading the key optical design and development of HUD products. "The company has not entered the HUD field for a long time, so there is a certain gap compared with domestic counterparts."
According to the forecast data of Gaogong Intelligent Vehicle Research Institute, by 2025, the installed capacity of AR HUD will exceed one million units per year, and the installation rate of W/AR HUD will exceed 30%.
However, for Desay SV, there are still bright spots in the first half of the year.
For example, the intelligent driving business segment continued to maintain a high growth rate. In the first half of the year, it achieved revenue of 1.839 billion yuan, a year-on-year increase of 86.38%, accounting for the company's overall business revenue, which increased from 15.40% to 21.07%.
According to the monitoring data of Gaogong Intelligent Vehicle Research Institute, from January to June 2023, 3.2435 million new passenger cars equipped with L2 (including L2+) will be delivered as standard in the Chinese market (excluding imports and exports), a year-on-year increase of 37.65%.
Among them, 1,471,300 new energy vehicles equipped with L2 (including L2+) were delivered as standard equipment, a year-on-year increase of 75.55%, and the standard equipment installation rate of front equipment was 50.38%.
Another data shows that from January to June 2023 in the Chinese market (excluding imports and exports), the share of standard L2 (including L2+) equipped with Chinese local system solutions in the Chinese market (excluding imports and exports) has reached 14.08%.
For Desay SV, which already occupies the top share of the high-end smart driving domain control market, there are huge market opportunities for stock replacement (local suppliers replace foreign capital) and upgrades (L1 upgrade to L2).
Previously, Desay SV made it clear in several external interactions that the lightweight intelligent driving domain controller IPU02 will launch more new solutions to adapt to the largest market segment of the domestic auto market, the mid-to-high price range models. At the same time, ADAS cameras and millimeter-wave radars are also being delivered in batches.
However, the pressure is not small.
Data show that in the first half of this year, the gross profit margin of Desay SV’s smart driving business was 17.01%, down 6.15 percentage points from the same period last year. Among them, operating costs increased significantly by 115.44% year-on-year.
As stated in the semi-annual report: In the first half of 2023, the auto market is generally positive, but problems such as slowing demand, inventory, and price pressures still affect the development of the auto industry. At the same time, the competition in all links of the entire industrial chain is intensifying, and the frequency of technological innovation is accelerating.