In the first half of 2023, China's auto market demand gradually recovered, and the smart electric vehicle market showed a "surge" phenomenon. However, Matrix Partners has faced a drastic change in performance.
Jingwei Hengrun (688326.SH) was founded in 2003. It successfully entered the ADAS pre-installation mass production market based on the Mobileye solution. It once gained market attention with the high growth of its smart driving, smart network and other sectors.
The financial report shows that in the past 2018-2022, Jingwei Hengrun's operating income increased from 1.53 billion yuan to 4.022 billion yuan, and the net profit attributable to the parent company during the same period increased from 20.775 million yuan to 234 million yuan, a year-on-year increase of more than 10 times.
However, in the first half of this year, Jingwei Hengrun's net profit lost 89.0544 million yuan, turning from profit to loss year-on-year; while deducting non-net profits, it lost 110 million yuan, a year-on-year drop of 415.51%.
However, a bigger crisis is slowly coming. The automotive electronic and electrical architecture is moving towards a central computing-regional control architecture. The traditional automotive supply chain system is ushering in a new round of reconstruction. Jingwei Hengrun’s traditional body controllers, ECU businesses such as gateways are facing the risk of being replaced.
At the same time, Jingwei Hengrun is also facing crises such as the continued decline in gross profit margin and the switching of suppliers by major customers. At this time, the smart car field is still in a continuous high R&D investment cycle, and the market competition in different market segments is trending. In white heat. It seems that Jingwei Hengrun is about to face a more severe test.
Net profit turns to loss
In the first half of this year, Jingwei Hengrun's operating income was 1.697 billion yuan, a year-on-year increase of 1.61%; the net profit attributable to the listed company was a loss of 89.0544 million yuan, a year-on-year decrease of 188.92%; and after deducting non-net profits, the loss was 110 million yuan. A year-on-year decrease of 415.51%.
Jingwei Hengrun said that there are two main reasons for the net profit loss. On the one hand, the company's business has seasonal characteristics, and the proportion of revenue in the first half of the year is relatively low; on the other hand, the increase in the scale of R&D personnel has led to a substantial increase in R&D expenditures. Caused by.
But in fact, behind Jingwei Hengrun's losses, there are still problems such as the successive robbing of major customers and the decline in main business revenue. At the same time, market competition has become fierce, which may be one of the important reasons for the decline in its net profit.
In the first half of this year, my country's automobile production and sales continued to rise. Among them, the production and sales of new energy vehicles continued to grow rapidly, and the number of intelligent functions such as smart driving and smart cockpits was eye-catching.
For example, in the field of intelligent driving, according to monitoring data from the Gaogong Intelligent Automobile Research Institute, from January to June 2023 in the Chinese market (excluding import and export), 3.2435 million new cars were delivered with standard front-end passenger car L2 (including L2+), year-on-year. An increase of 37.65%. Among them, 1.4713 million new energy vehicles were delivered with L2 (including L2+) as standard front-end equipment, a year-on-year increase of 75.55%, and the adoption rate of front-end standard equipment was 50.38%.
However, against the background of bright industry demand prospects, behind the slight increase in Jingwei Hengrun's operating income, the revenue of its main business, the electronic products business, has declined.
The main business of Jingwei Hengrun is divided into two major segments: electronic product business, R&D services and solution business. Among them, the electronic product business mainly includes intelligent driving, intelligent network connection, intelligent cockpit, body and comfort area, chassis control, new energy and power, etc. In the first half of the year, it achieved revenue of 1.265 billion yuan, a year-on-year decrease of 2.28%; R&D services and solutions business Realized revenue of 421 million yuan, a year-on-year increase of 13.12%.
Under the same background, the operating income and net profit of peer companies such as Desay SV, Huayang Group, and Neusoft Group have maintained a growth trend. For example, Desay SV's operating income in the first half of this year was 8.724 billion yuan, a year-on-year increase of 36.16%; the net profit attributable to shareholders of listed companies was 607 million yuan, a year-on-year increase of 16.47%. Among them, Desay SV’s intelligent driving business segment achieved revenue of 1.839 billion yuan, a year-on-year increase of 86.38%.
Jingwei Hengrun's traditional business is body controllers, lighting controllers, etc. Relying on Mobileye, it quickly entered the ADAS pre-installation mass production market, and successively won over automobile companies such as FAW Capital, SAIC Hengxu, GAC Capital, and BAIC Production and Investment. The investment has also enabled its operating income to achieve rapid growth.
In the past 2020-2022, Jingwei Hengrun's operating income was 2.479 billion yuan, 3.262 billion yuan, and 4.022 billion yuan respectively, and the net profit attributable to shareholders of listed companies was 73.6938 million yuan, 146 million yuan, and 234 million yuan.
But now, China's major automobile brands and ADAS companies are rushing to develop the L2+ market. Many of Mobileye's customers have entered a platform switching cycle , abandoning Mobileye and choosing chip platforms such as Horizon and TI. Most of Jingwei Hengrun's passenger car ADAS systems use Mobileye's main control chip, and its operating income will inevitably be affected to a certain extent.
Data shows that Jingwei Hengrun's assisted driving products (based on Mobileye chips and perception algorithms) mainly contribute passenger car orders from models such as SAIC Roewe, FAW Hongqi and Geely, while commercial vehicles come from models such as FAW Jiefang and Sinotruk Howo.
Previously, most models of SAIC Roewe were equipped with Mobileye's assisted driving solution, but now SAIC has reached a strategic cooperation with Horizon and has taken a stake in Horizon. Its Roewe RX5 also uses the Horizon Journey 3 chip, which happens to be the product of Matrix Partners. important client.
At the same time, most of the models of Jingwei Hengrun and FAW-Hongqi have also entered the cycle of being replaced. Currently, FAW Hongqi's L3-level high-end autonomous driving solution customized for SOA services has selected Freetech's ADC3.0 domain controller platform. Previously, FAW Hongqi and Neusoft have jointly established a joint innovation center. Dongtuan Group and Neusoft Ruichi has won many smart cockpit and smart driving related projects from FAW Hongqi.
The semi-annual report shows that Jingwei Hengrun has business relationships with well-known domestic and foreign large-scale automobile manufacturers or first-tier suppliers such as FAW, Geely, GAC, BAIC, SAIC, Jiangling, Antolin, etc. During the reporting period, the company's revenue from the top five customers accounted for 48.88% of the current main business revenue, indicating a high degree of customer concentration.
Obviously, once major customers continue to change suppliers in the future, Jingwei Hengrun's performance will still be affected. Previously, Jingwei Hengrun pointed out in its prospectus that in order to seize the intelligent connected car market, Jingwei Hengrun took the initiative to lower prices, resulting in a continued decline in the gross profit margin of its main business. In the first half of 2023, Jingwei Hengrun's gross profit margin was 27.60%, a decrease of 1.67 percentage points year-on-year; while the net profit margin was -5.25%, a decrease of 11.25 percentage points from the same period last year.
Tests intensify
At this stage, the automotive electronic and electrical architecture is evolving towards a central computing-regional control architecture. Competition in the entire smart car market is becoming more intense. At the same time, the entire supply chain system will also enter a new round of reshuffle cycle.
Against this background, ECU suppliers under the traditional electronic and electrical architecture represented by Jingwei Hengrun will face the risk of being gradually replaced in their future product lines. For example, traditional body and gateway suppliers will gradually be replaced by domain controller and central domain controller suppliers.
Currently, on new models such as the Xpeng G9, due to the adoption of a central computing-region architecture, the previous central gateway (supplier: Matrix Partners) has been integrated into the central domain controller. Matrix Partners has also been integrated into the central domain controller by Flextronics and Hangsheng. Wait for supplier replacement.
In order to better adapt to the market demand for automobile intelligence, Jingwei Hengrun frequently increases the layout of intelligent driving domain controllers and establishes a cockpit division to complete the full layout of intelligent driving + intelligent cockpit + body domain control, thereby enhancing the company's core competitiveness.
Data shows that Jingwei Hengrun has invested a lot of R&D resources in the field of domain controllers, including low-cost, low- and medium-power integrated domain controllers based on different combinations of TDA4, EyeQ6, etc., as well as high-performance computing platforms HPC and chassis domains. controller etc. Jingwei Hengrun said on the interactive platform that the driving and parking integrated domain controller and chassis domain controller have been mass-produced, but the new generation of intelligent driving domain control products based on domestic high-computing power chip solutions are still in the prototype development stage.
However, Jingwei Hengrun's current dual TDA4 domain control solution in Nezha is mainly a single hardware solution. The sensing algorithm still comes from third-party partners, and there is a certain gap in competitiveness with mainstream ADAS suppliers.
It is also important to mention that the competition in the smart driving market has become extremely fierce. Matrix Partners not only faces direct competition from Mobileye’s other partners in the Chinese market - Zhixing Technology, Yihang, etc., but also faces Bosch, Ceai Competition from international giants such as Fu, Continental, and Aptiv. At the same time, more local suppliers including Moshi Intelligence, Jimu Intelligence, Zhijia Technology, MINIEYE, Heduo Technology, Huawei, DJI, etc. have successively entered the pre-installation cycle.
For example, in the domain controller track, Matrix Partners' potential competitors include not only China's local Tier 1 companies such as Zhixing Technology, but also many auto parts OEM giants such as Jabil. The market has entered a red ocean competition cycle.
Against this background, the field of intelligent connected cars still requires continued high R&D investment, but at this time, Matrix Partners' cash flow is already under pressure and debt pressure is high. The financial report shows that the net cash flow generated by Jingwei Hengrun’s operating activities in the first half of this year was -625 million yuan, while the total current liabilities were 3.266 billion yuan.
Overall, the intelligent network business has become the business segment with the highest revenue growth for many listed companies, but at the same time competition is also intensifying, and the implementation of new technologies is also accelerating. Some insiders bluntly said: "The real harvest period of intelligent driving has not yet come, and we still face many challenges in the future."