21st Century Business Herald reporter Zhang Sainan and intern Yang Fan report from Shanghai

At the symposium on private enterprises held a few days ago, entrepreneur Yu Renrong became popular, which also made his chip leader Weier shares (603501. SH) into the field of vision of more investors.

Before SMIC's landing on the Science and Technology Innovation Board, Weir was the largest market capitalization company in the A-share semiconductor industry. After two years of industry downturn, this domestic CIS (image sensor) chip manufacturer will finally usher in a performance rebound in 2024 and gradually achieve a valuation recovery in 2025.

At the close of trading on March 7, the share price of Weir shares closed at 144.91 yuan, up 40% from the beginning of the year, with a total market value of 176.2 billion yuan.

The performance of Weir shares in the secondary market makes the capital story of the head Yu Renrong even more legendary.

Behind the rise of this chip giant are wonderful mergers and acquisitions, which can be called the epitome of the development of China's semiconductor industry.

At present, this story is still continuing, you know, in 2021, the market value of Weir shares once approached 300 billion yuan, is the current valuation recovery just a starting point?

Reversal of performance

In July 2021, the share price of Weir shares exceeded 250 yuan, with a total market value of more than 280 billion yuan, reaching a historical peak and becoming a historical highlight.

At that time, the semiconductor industry fell into a shortage of cores, and the valuations of many A-share semiconductor companies were pushed up 688981. SH).

However, with the overall downward adjustment of the industry in 2022, Weir shares have also experienced a double kill of performance and stock price, and have fallen into a trough.

In April 2022, the company's share price fell below 100 yuan, the revenue of the year declined for four consecutive quarters, and the annual net profit fell by 70% year-on-year.

The situation has not improved in 2023, and the annual net profit has fallen by another 40%, leaving only 555.6 million yuan, which is about 12% of the net profit in 2021 (4.476 billion yuan) at the peak.

Weir's main business is semiconductor product design, the most important of which is the image sensor business, accounting for more than 70% of the revenue. In terms of downstream applications, smart phones and automotive electronics are its two major application markets, as well as emerging applications such as security, medical care, and notebooks.

It is not difficult to see from the downstream applications that the changes in demand in the mobile phone and automobile markets have profoundly affected the performance changes of Weir shares. In 2022 and 2023, the smartphone market will be sluggish, not only will things not be sold, but the price will also fall, which will make the inventory of upstream Weir shares high and the performance stalled.

At that time, Weir shares also responded to the 21st Century Business Herald reporter, saying, "Mainly affected by terminal sales, the company itself is no problem, it is indeed the sales of mobile phones affected by the market." ”

It is not until the second half of 2023 that the single-quarter performance of Weir shares shows signs of recovery, and the inventory level returns to a relatively reasonable state.

A real recovery in performance will occur in 2024.

On the one hand, under the condition of a low base in the previous year, the net profit of Weir shares increased significantly year-on-year, and the net profit growth rate in the first half of the year reached more than 7 times; On the other hand, the recovery of the consumer electronics market, coupled with the penetration of autonomous driving applications in the automotive market, the company's revenue and gross margin have achieved significant growth.

According to the 2024 performance forecast announced by Weir Co., Ltd. a few days ago, its annual net profit will reach 3.155 billion yuan ~ 3.355 billion yuan, a year-on-year increase of 467.88% ~ 503.8%. The explanation given by the company is that it has actively promoted the optimization of product structure and supply chain structure to better cope with the impact of industrial fluctuations.

It can be seen from the 2024 semi-annual report that the revenue growth of smartphones and automotive electronics is the main driving force for the recovery of Weir's performance.

The revenue of the company's image sensor business from the smartphone market reached about 4.868 billion yuan, an increase of 78.51% over the same period last year. At the same time, with advanced CIS solutions covering a wide range of automotive applications, including ADAS, cab interior monitoring, electronic rearview mirrors, dashboard cameras, rearview and panoramic images, automotive CIS products have been introduced more and more new design solutions.

Judging from the trend of the secondary market, under the premise of good expectations for the third quarter of 2024, the share price of Weir shares ushered in a wave of rebound at the end of September and early October, and then fluctuated sideways. By the end of January 2025, with the release of the 2024 annual performance forecast, coupled with the overall recovery in the valuation of Chinese technology stocks, the share price of Weir shares has once again entered a significant upward period.

100 billion growth

Analysis of the reasons for the current round of valuation recovery of Weir shares, if the performance reversal is the core logic, then in this process, the head of Yu Renrong's "out of the circle" is a small accelerant.

On February 17, an unprecedented private enterprise symposium was held in Beijing, and an entrepreneur who was low-key and did not often appear in public attracted market attention. Later, according to official reports, this is Yu Renrong, chairman of Weir shares. In the next two trading days, Weir shares continued to rise sharply, and since then all the way up.

At the close of trading on March 7, the share price of Weir shares closed at 144.91 yuan, with a total market value of 176.2 billion yuan.

Yu's own resume is legendary.

According to public reports, Yu Renrong was born in Zhenhai, Ningbo in 1966 and studied at Zhenhai Middle School in middle school. In 1985, Yu Renrong was admitted to the EE85 class of the Radio Department of Tsinghua University as the champion of Zhenhai. This class has walked out of Shu Qingming, one of the founders of GigaDevice, Feng Chenhui, co-founder of Zhuosheng Microelectronics, Zhao Lixin, founder of Geke Microelectronics, and Zhao Lidong, founder of Suiyuan Technology.

In 2022, the Department of Electronic Engineering (formerly known as the Department of Radio Electronics) of Tsinghua University celebrated its 70th anniversary, and some media commented in reports that the class of 1985 had set up an "EE85" group portrait in China's semiconductor industry.

After graduation, Yu Renrong worked as an engineer and started a career until 2007, when he established Weir Co., Ltd. in Shanghai, engaged in the design of semiconductor discrete devices and power management chips, opening a new chapter in the semiconductor field.

According to the enterprise investigation, Yu Renrong is the actual controller of Weir shares, and currently directly holds 333 million shares of the company, accounting for 27.42% of the total share capital; indirect shareholding 6.087%; The total shareholding ratio is 33.5%.

In the process of the development and growth of Weir shares, "mergers and acquisitions" is its main means of capital operation.

In 2014~2018, Weir successively acquired digital TV SoC, RF front-end and other companies, and completed the acquisition of OmniVision (OV) in 2019 to enter the CIS track; In 2020, it acquired Synaptics' TDDI business, a leading semiconductor design company in the epitaxial strategic position. In 2021, it will invest 2.1 billion yuan to deploy Beijing Junzheng, and increase its shareholding to 5% through private placement and secondary market; Since 2020, Weir has invested more than 5 billion yuan through its funds, covering automotive chips, AI vision and other tracks.

Among them, the acquisition of CMOS sensor giant Haowei Technology by Weir shares is talked about by the market. OmniVision is the world's leading CIS provider, with revenue of approximately RMB9.8 billion (US$1.4 billion) in 2019, a global market share of approximately 8%, and a net profit of approximately RMB1.1 billion. The acquisition cost 15.2 billion yuan, making Vail the world's third largest and China's largest image sensor manufacturer.

In a media interview in September 2024, Yu Renrong talked about his views on mergers and acquisitions, saying, "The company's current expansion track is large enough, and mergers and acquisitions will also look for suitable opportunities around the existing track to enhance the global market influence." ”

In 2018, he and Ren Zhijun, who is also an alumnus of Tsinghua University, took over the new Henghui Electronics Co., Ltd. with smart card business as the core. The company is currently in the process of IPO and is expected to become Yu's second IPO platform. Yu Renrong holds 31.9428% of the total shares and is the company's major shareholder.

Periodic perturbations

On the one hand, the expectation of further improvement in performance, and on the other hand, the blessing of the founder's halo, Weir shares are outlining a new capital story, but the shadow of recovery has always existed.

In terms of performance, even if Weir achieves nearly 5 times net profit growth in 2024, the absolute value is at least 1.1 billion yuan away from the peak in 2021.

In an interview with the media, Yu Renrong expressed his views on the substantial increase in performance. He pointed out that although there are reasons such as technological breakthroughs, cost reduction and efficiency increase, the most fundamental thing is that "last year's base was too low". In his view, the performance growth logic of the semiconductor industry has fundamentally changed compared with the past.

"The company's CIS business has recovered to an all-time high, but overall earnings have not yet reached a historical peak, mainly due to the significant reduction in the gross profit margin of the current display business." According to Yu's analysis, "In the past, the profitability of the display business was partly due to inflated market prices and supply shortages. ”

Commenting on the outlook for 2025, SMIC Co-CEO Zhao Haijun also said that localized production has brought more market demand, but homogeneous competition has made structural excess capacity still face fierce competition even when the market recovers.

Horizontally, the performance of the other two major CIS manufacturers in China also grew rapidly last year.

SmartSens(688213. SH) disclosed the 2024 performance express report, during the reporting period, the company achieved operating income of 5.969 billion yuan, an increase of 108.91% over the previous year; The net profit attributable to the owners of the parent company was 391 million yuan, a year-on-year increase of 2651.81%.

For performance growth, SmartSens said that the company continued to cultivate in various markets, especially in the field of smart phones and automotive electronics, strengthened product research and development and marketing, promoted product sales, achieved a substantial increase in operating income, effectively improved profitability, and significantly increased net profit margin. In the field of high-end CIS chips for smartphones and automotive CIS, it has become a strong opponent of Weir shares.

According to the 2024 annual performance express report released by Gekewei (688728.SH), another CIS manufacturer, it will achieve revenue of 6.389 billion yuan in 2024, a year-on-year increase of 36.02%; The net profit attributable to the parent company was 187 million yuan, a year-on-year increase of 287.24%. During the reporting period, the company's shipments of 13 million and above pixel products increased rapidly, and at the same time, following the mass production of 32 million pixel products, the company's 50 million pixel products also achieved mass production, and were recognized by many well-known consumer electronics brands at home and abroad.

As we all know, the cyclical nature of the semiconductor industry has always been a sword of Damocles hanging over the heads of businesses. At present, the performance of Weir shares has indeed recovered and reversed, but at some point in the future, it will fall into a trough again with the industry cycle. More importantly, the CIS track in which Weir shares are located is highly competitive, and its future value growth will also be accompanied by competition and uncertainty.