Event: the company publishes its 2022 semi-annual report. 2022H1, the company achieved revenue of 500 million yuan, an increase of 38.87% over the same period last year, and a net profit of 163 million yuan, an increase of 105.09% over the same period last year. 2022Q2, the company achieved revenue of 299 million yuan, an increase of 57.34% over the same period last year, and a net profit of 95 million yuan, an increase of 128.16% over the same period last year.

The high growth of integrated circuit revenue is the main driving force of the company's performance growth. The company's integrated circuit products are mainly digital-analog mixed products dealing with analog and digital signals, with long product life cycle, high technical barriers, high investment, high cost and technical personnel experience, therefore, the competition pattern of the industry is relatively stable. Benefiting from the growth of market demand in the integrated circuit industry, the company increased the speed of new product launch and market development while ensuring the continuous improvement of the technical level. In the first half of the year, the company's integrated circuit business achieved revenue of 262 million yuan, an increase of 77.45% over the same period, significantly higher than the overall revenue growth rate of the company. We believe that with the continuous improvement of the equipment information level, the demand for digital and analog integrated circuit products will continue to grow, and the company's digital and analog integrated circuit products will continue to promote the company's performance growth.

The investment in R & D has achieved results, the scale effect has increased significantly, and the expense rate has further decreased during this period.

In the early stage, in order to develop integrated circuit products, the company invested heavily in R & D. at present, many products have been mass produced, and the proportion of R & D investment has gradually decreased. The company's revenue scale continues to grow, the scale effect increases significantly, and the proportion of management expenses and sales expenses decreases significantly. During the reporting period, the expense rate during the company period was 25.63%, which decreased by 7.11pct compared with the same period last year, in which management expenses, sales expenses, financial expenses and R & D expenses accounted for 12.16%, 5.28%, 0.5% and 7.69% respectively, with year-on-year changes of-0.76pct,-1.23pct, + 0.05pct and-5.18pct, with the most obvious decline in R & D expenses. We believe that with the continuous expansion of the company's products and the continuous growth of revenue, there is still room for the expense rate to decline during the company period.

The completion of the third-generation network of Beidou is expected to help the company open up its growth space. The company has ploughed the Beidou industry for many years, and its related products cover the whole industry chain of "components-terminal-system application" of Beidou satellite navigation. From Beidou No. 1 to Beidou No. 3, it has maintained strong product technology advantages and new product development capabilities. It is one of the leading enterprises in the field of Beidou navigation in China. After the completion of the second generation of Beidou network in 2013, the compound growth rate of Beidou products reached more than 50% from 2012 to 2015, which was significantly driven by Beidou network. With the completion of the global networking of the Beidou 3 satellite navigation system in 2014, the overall development and output value of China's satellite navigation and location service industry have increased obviously. according to the White Paper of the China Satellite Navigation and Positioning Association, the overall output value of China's satellite navigation and location service industry reached 403.3 billion yuan in 2020, with a compound growth rate of about 20.11% from 2020 to 2020. We believe that after the completion of the third generation of Beidou network, the company's ground terminal equipment is expected to usher in rapid growth, and the company's Beidou products are expected to help the company's performance to open up growth space in the future.

Investment advice: we expect the company's net profit from 2022 to 2024 to be 3.1,4.9 and 700 million yuan respectively, and the PE of the previous share price to be 48,31 and 21 times respectively, and continue to give a "buy-A" rating.

Risk hint: the risk that the company's integrated circuit product delivery is not as expected; the domestic Beidou third-generation navigation progress is not as expected.