Event

The company released its three-quarter report for 2022, with operating income of 3.709 billion yuan, an increase of 4.3% over the same period last year, a net profit of 395 million yuan, an increase of 3.47% over the same period last year, and a net profit of 305 million yuan, down 3.28% from the same period last year.

Brief comment

1. Income has increased steadily, gross profit margin has declined, and profit growth is under short-term pressure.

In the first three quarters of 2022, the company achieved operating income of 3.709 billion yuan, an increase of 4.3% over the same period last year, a net profit of 395 million yuan, an increase of 3.47% over the same period last year, and a net profit of 305 million yuan, down 3.28% from the same period last year. The gross profit margin was 35.41%, down 1.8 percentage points from the same period last year, and the net interest rate was 10.8%, down 0.46 percentage points from the same period last year.

In the third quarter of 2022, the company achieved operating income of 1.225 billion yuan, an increase of 9.85% over the same period last year, a net profit of 104 million yuan, a decrease of 3.35%, and a non-return net profit of 70 million yuan, down 20.96% from the same period last year. The gross profit margin was 31.01%, down 5.37% from the same period last year, and the net profit rate was 8.29%, down 2.06% from the same period last year.

The company's operating income and return net profit grew steadily in the first three quarters, and the income growth rate increased in the third quarter, but the net profit level decreased compared with the same period last year, which is expected to be mainly due to the decline in the proportion of revenue from special market products with higher gross profit margin. The company's profitability has declined, but the company continues to strengthen its management and improvement work, and the expense rate has declined during the period, and the net profit rate is less than the gross profit margin.

2. The national defense information business continues to achieve breakthroughs, and the dominant position of the industry is stable.

Core competencies in the field of wireless communications continue to be built. The company's shortwave business comprehensively broke through the field of airborne mainstream platforms, comprehensively bid for the next generation satellite communication system project, and broke through the field of satellite vehicles for the first time, winning the bid for radio and television terrestrial digital TV transmitter project and a certain type of ship navigation radar project. major breakthroughs have been made in ordering in radio and television markets and radar fields.

The invention patent of "Radar Multi-target data Interconnection method" won the 23rd China Patent Excellence Award, and the jointly declared project "key Technologies and applications of Satellite Communications for Space-Space Integration" won the second prize for scientific and technological progress in Guangdong Province.

Beidou No. 3 terminal products achieve a comprehensive layout in the special organization market. In the field of Beidou navigation, the company is the earliest unit engaged in the development of radio navigation equipment in China, with domestic leading high-precision, high dynamic, anti-interference and other key technologies of independent intellectual property rights, with Beidou whole industry chain R & D and service capabilities. In July this year, the company invested in the establishment of a professional core company Jing Wei Tianteng, which is engaged in the research and development of chips such as wireless communication RF transceiver and RF front-end, high-performance digital-analog hybrid, and general-purpose devices, so as to further expand the chip product line and build a general-purpose chip company. The company has a high market share in the field of Beidou navigation terminal equipment, and a number of Beidou No. 3 general terminals and equipment have been successfully shortlisted in the market of special institutions, and continue to break through the field of new weapons platforms. to lay a solid foundation for further expanding market share.

Relying on the competitive advantage of Beidou No. 3 chip, the company has realized the comprehensive layout of Beidou No. 3 terminal in the special organization market, entered the field of high-end new platform, and has considerable market capacity.

3. Join hands with Poly to promote the development of flight simulation business and strategically lay out the unmanned business development platform.

Join hands with Poly International to promote the development of flight simulation training business. In November 2021, the company signed the Strategic Cooperation Framework Agreement with Poly International Holdings Co., Ltd., to jointly develop national high-end equipment manufacturing and high-end services, to achieve the strategic layout and market expansion of both sides in the field of flight simulation, and to build professional training institutions with aviation flight training capabilities based on the mainland and covering some overseas countries. Promote the improvement of the overall level of China's flight simulation training industry and the process of equipment localization. At present, the relevant cooperation projects are progressing steadily, the company mainly provides technical and equipment support, and Poly International mainly uses superior resources to develop market customers and negotiate the implementation progress according to the needs of bilateral business cooperation and the project. The two sides can jointly form a joint venture company and take the joint venture company as the platform to carry out relevant specific business.

The militarization of AI technology in new areas will consolidate the first-mover advantage and create a new platform for business development. The company won the bid for an unmanned minesweeping vehicle project in the first place, further consolidating the leading advantage of unmanned communication equipment in this field. Invest in Guangzhou Hagrid Tiansheng Technology Co., Ltd., create unmanned business development platform and unmanned field capital operation platform, lay a solid foundation for the rapid development of the company's unmanned business.

4, investment advice: wireless communications to maintain a high demeanor, Beidou business ushered in important development opportunities, performance growth is expected to maintain the "buy" rating.

The company has a deep accumulation of technology in the field of wireless communications and Beidou, and is expected to benefit from the acceleration of national defense information development and construction in the future. The company focuses on the main business and management reform, continuously ensures that high R & D investment brings new product breakthroughs, and is expected to achieve sustainable growth. We estimate that the company's operating income from 2022 to 2024 will be 5.964 billion yuan, 6.699 billion yuan and 7.871 billion yuan respectively, with year-on-year growth rates of 8.95%, 12.32% and 17.5% respectively, and the net profit of returning home will be 724 million yuan, 841 million yuan and 1.074 billion yuan respectively. the year-on-year growth rates were 10.78%, 16.15% and 27.75%, respectively. The current market capitalization corresponds to PE of 27x, 23x and 18x respectively, maintaining a "buy" rating.

5. Risk hint.

The arrival of military orders fell short of expectations. Military products have a relatively clear attribute of "fixed production by sales". After downstream customers give orders, the company organizes production and delivery work, but the landing rhythm of military orders is affected by many factors. If the landing rhythm of the order slows down, the company's work in production delivery and subsequent revenue recognition will be delayed, which may adversely affect the company's performance.

The progress of the development and installation of future models of equipment is not up to expectations. There are relatively strict process requirements for the development and production of military products, which often requires a long period of research and development in the Prophase. After the product is finalized, it will enter the stage of mass production and loading according to customer demand. If there is a delay in this process, it may have a certain negative impact on the company's operation, resulting in poor performance in the current period.