ArcSoft Technology (688088) dynamic research： mobile vision AI leader IOT business worth looking forward to
ArcSoft Technology (688088) dynamic research: mobile vision AI leader IOT business worth looking forward to
Investment Highlights: The world’s leading provider of visual AI solutions.Since its establishment in 2003, the company has focused on the research of visual AI algorithms and has accumulated extended algorithms. It is committed to applying visual AI algorithms to smart phones, smart driving and other Internet of Things. Among them, the smart phone business is the company’s existing business body.The company achieved revenue in 20184.580,000 yuan, an increase of 32 in ten years.42%, achieving net profit attributable to mothers1.580,000 yuan, an increase of 82 in ten years.49%, with a revised average ROE of 22.85%.In the end, the company showed good governance capabilities, good cost control, and sales expenses and management expenses remained basically stable in the past three years, and its proportion of revenue continued to decrease, thereby 厦门夜网 ensuring the continuous improvement of the company’s profitability.In terms of cash flow, the company’s sales of products and the provision of labor services basically match the cash and income, and its operating cash flow has continued to improve. In 2018, its net share of revenue reached 54.18%.In terms of research and development, the company has maintained a high level of research and development investment and all expenses, and the ratio of research and development investment to total revenue in the past three years was 34.59%, 31.43%, 32.42%, as of the end of 2018, the proportion of R & D personnel reached 65.73%, providing long-term competitiveness for the company. High-growth smartphone business with technology + sticky built-in moats.The company’s rich product line of smartphone business, for a variety of solutions for single camera, dual (multi) camera and depth camera scenarios, thanks to the company’s long-term algorithm accumulation and close cooperation with upstream chip and camera module manufacturers, the company’s smartphoneThe product has a high urban market share on Android phones. The main customers include Samsung, Huawei, Xiaomi, OPPO, Sony and other global mainstream mobile phone manufacturers. The company’s smartphone business revenue in 20184.390,000 yuan, an increase of 39 in ten years.73%, accounting for 95% of revenue.83%, and overseas customers account for about 50% of revenue. Full integration proves the company’s leadership in the field of smartphone AI vision.The company’s smart phone AI product sales model uses a direct sales method. The combination of fixed-rate charging and piece-rate charging. In 2018, the two charging models accounted for 50% of revenue.9% and 49.1%, the proportion of piecework fee income is on the rise.The company’s products are more sticky and have higher contract renewal rates. The contract renewal rates in the past three years were 87.5%, 86.7%, 77.8%, the company has served most mainstream mobile phone manufacturers for more than 5 years, and cooperated with Samsung for more than 15 years.We believe that the company ‘s mobile phone business has grown rapidly in recent years. The development of new customers and the increase in contract value under complex multi-camera algorithms. The company ‘s smart phone business revenue is still positively related to the number of mobile phone segments under the volume-price conversion logic.Or, the demand for mobile phone camera algorithms continues to develop in a complicated direction, and the company’s smartphone business still has certain room for growth under high customer stickiness. Visual AI is highly scalable, and the Internet of Things business is worth looking forward to.Automotive intelligence is a series of automobile development directions. Environmental monitoring + assisted driving will make the number of cameras in the smart car body reach more than 10, and the demand for intelligent driving vision hardware and related algorithms is very huge. The intelligent transformation of equipment in the era of the Internet of Everything also hasGreat market space.The accumulation of long-term accumulated algorithms and the company’s technology have been very malleable. In the second half of 2018, the company began to deploy intelligent driving and other IoT fields.In the field of intelligent driving, the company has included many solutions such as in-car safe driving warning, driver identification, assisted driving warning, and automatic parking; in other IoT fields, the company has also targeted smart refrigerators, smart unmanned retail, etc.A variety of IoT devices and smart insurance have proposed targeted solutions, replacing Midea’s smart home algorithm authorization.We believe that the era of intelligent driving and the Internet of Things has just begun, and the company’s strength in the field of AI vision algorithms is constantly increasing. In the future, the Internet of Things is expected to become a new profit growth point for the company. AI open platform construction application ecology.The company launched an AI open platform in 2018, which provides core technologies such as face recognition, witness verification, and living body detection for free to companies, teams, and individual developers in need.We believe that the integration of the AI open platform reflects the company’s technical self-confidence, and integrates the company’s AI vision technology, which can develop rapidly in different fields, accelerate its expansion in different application scenarios, and help the company build an AI vision application ecology and provide company technologyAccumulate and lay the foundation for further expansion of business. Earnings forecast and investment rating: Given “overweight” rating.We believe that the company has a wealth of technology accumulation, adding a high city share and customer stickiness to the AI visual algorithm of smartphones. At the same time, IoT businesses such as smart cars are expected to become the company’s new profit growth point.We expect the company’s EPS to be zero in 2018-2020.53/0.70/0.92 yuan, corresponding to the current expected PE is 124/94/71 times, respectively, given an “overweight” rating. Risk reminders: (1) Expansion of the scope of smart phones; (2) The development of IoT business such as smart cars is less than expected; (3) The construction progress of fundraising projects is less than expected; (4) Market systemic risks.