Event: China porcelain Electronics released the quarterly report for 22 years. In the first three quarters of 22, the company's income was 999 million yuan, + 25.46% compared with the same period last year; the net profit from the return to the mother was 123 million yuan, + 22.79% from the same period last year; the net profit from the non-return was 105 million yuan, + 19.06% from the same period last year; and the gross profit margin was 27.68%, year on year-1.39pcts. 22Q3 income 365 million yuan, year-on-year + 21.89%; return net profit 45 million yuan, year-on-year + 3.55%; deduction of non-return net profit 39 million yuan, year-on-year + 17.55%; gross profit margin 26.88%, year-on-year-1.71pcts. In the first three quarters of 22, the company's sales expenses were 4 million yuan (year-on-year-32.39%), management expenses 34 million yuan (year-on-year + 18.72%), R & D expenses 136 million yuan (year-on-year + 32.01%), financial expenses-12 million yuan (year-on-year-9 million yuan), Q3 final inventory 304 million yuan (year-on-year + 33.02%), contract debt 28 million yuan (year-on-year + 108.90%).

Mergers and acquisitions continue to advance, boosting the company's performance. The company's plan to acquire radio frequency chips in gallium nitride communication base stations of Bowei, Guolian Wanzhong and Dianke continues to move forward. 1) Bowei company specializes in the design, packaging, testing and sales of gallium nitride communication radio frequency integrated circuit products, which achieve full-band, full-power grade, full-series development and industrialization of gallium nitride base station power amplifier. the quality reaches the domestic leading and international advanced level. 2) Guolian Wanzhong's main gallium nitride communication base station RF chip design, sales, silicon carbide power module design, production, sales, gallium nitride communication base station RF chip main customers are Ambron and other radio frequency device manufacturers, used in 5G communication base station construction, silicon carbide power module is mainly used in new energy vehicles, industrial power supplies, new energy inverters and other fields. At present, it has signed supply agreements and supply with BYD, Zhixuan and other important customers. 3) the main product of gallium nitride communication base station radio frequency chip business is gallium nitride radio frequency chip, the chip index reaches the international leading level, and it covers the process of chip manufacturing. It mainly provides gallium nitride communication base station RF chips for its terminal products for Bowei and Guolian Wanzhong. According to the performance commitment, the non-return net profit of M & An assets from 2022 to 2025 is expected to be 3.56,3.86,4.18 and 452 million yuan respectively, which is expected to expand the company's business structure, enhance the company's ability to resist cyclical risks and sustainable profitability, and improve the level of investment return of the company's shareholders.

The utilization rate of production capacity was maintained at a high level, and the construction of fund-raising projects was accelerated. The production task of the company is full, and the capacity utilization rate is maintained at a high level. The production line project of consumer electronic ceramic products raised by IPO has a planned construction period of 36 months, and is currently under construction. It is expected that the project will reach an annual production capacity of 4.405 billion consumer electronic ceramic products.

Profit forecast. Excluding acquisitions and consolidation, we expect the company's 22-24 return net profit of 163 million yuan, 242 million yuan and 339 million yuan, and EPS of 0.78 yuan, 1.16 yuan and 1.62 yuan. We believe that with the acquisition of gallium nitride and other chip assets, and after the statement is expected to significantly increase the company's profits, with reference to the comparable company valuation, we give the company a certain valuation premium, giving the company a 23-year PE 90-100x, corresponding to a reasonable value range of 104.40-116.00 yuan, given a "better than the market" rating.

Risk hint. Asset mergers and acquisitions are lower than expected, and the release of production capacity of fund-raising projects is lower than expected.