Chip maker AMD (AMD) has been hit hard lately by the company's partnership with rival Intel (INTC) in the development of the i7-8809G chip, which is equivalent to the integrated processor of the mobile Intel Core processor and AMD VEGA graphics card. The other is the huge Intel processor System security loopholes in the patch chip slowed down, while the AMD chip is not affected by the different structures, the company shares rose sharply for two days, rose more than 12%, the following brief analysis of the company's business and future potential.
By business segment
The company has two major business segments: Computing and Graphics segment (C & G) and Enterprise, Embedded and Semi-Custom Business segments (EESC for short), segment revenue and revenue share trends are as follows, revenue are Keep growing in 2017. Currently, the largest PC market still belongs to notebooks. The competitiveness of corresponding companies' APUs (integrated chips) is increasing compared with that of Intel. In addition, the current C & G's revenue proportion drops to EESC, and EESC revenue Growth will be hedging C & G business growth.
Profitability, see the chart below the operating margin comparison, segment profit margins to the EESC, including the newly released data center server chip EPYC higher profit margins helpful, two-quarter profit margin increased upward. Historically, EESC is at least 10% above the C & G segment, approaching 10.19% and 8.55% respectively in the last two quarters and Q3 is C & G the most profitable quarter ever.
From the product attributes are divided into CPU and graphics card, look at the CPU, 17 Q3 desktop CPU and mobile chip shipments market share reached 11.2% and 7.1%, respectively, from the hands of Intel to seize some of the market.Card, the company desktop Machine graphics and mobile graphics shipments accounted for 4.2% and 3.7% respectively, an increase lower than the rival NVIDIA.
Source: IDC
Looking at revenue, CPU revenue in the past was generally 50% higher than graphics revenue, and quarterly growth (36%) was higher than the 16% of graphics cards, but the above figures are available only from the C & G segment, Business segment categories overlap, 14-year reclassification a large part of the CPU and graphics business to join the EESC division, such as semi-custom business server processor EPYC.
Profitability statements are not presented separately, can only make a reasonable estimate.As shown below, the average price of the CPU product is about 50% higher than the graphics card to 70%, according to the truth CPU is higher than the graphics card profit margin.
According to the above segment revenue ratio, C & G operating profit margin and assumed CPU and graphics profit margin differences, the Q3 CPU and graphics operating profit margins were 11.21% and 6.54%, taking into account EESC operating margin of 10.49% Can be introduced Q3 EESC division CPU and graphics revenue ratio were 78% and 22%. According to the above consolidation CPU and graphics revenue ratio as follows:
Looking to the future
With perfect product mix and patent authorization, the company's profit margin is expected to increase in 2018 and its operating profit margin is expected to reach 12%. The new chip growth is expected to increase the profit margin of C & G and EESC by 0.5%. With strong new product EPYC and Intel's cooperation, the company is expected to enhance the PC chip market share, it can be said that 17 to 18 years server chip is a major opportunity, the overall look is expected to CPU long-term growth rate to 13%.
Valuation: 18 years of space
The two methods are based on C & G, EESC, CPU and graphics respectively. The general method is based on the valuation of revenue. The formula is as follows: Pi = P / S * ixSi (Pi is the corresponding segment or product target price, P / S * i is the corresponding fair market sales rate, and Si is the corresponding sales revenue. The other valuation models are based on the Sales Franchise Value Model (SFV) for future earnings growth. The formula is as follows:
The corresponding valuation results in the following table, combined with the two sets of target price corresponding to the valuation, the company's target price in 2018 range of 15 to 18 US dollars, there is plenty of space.
