Event: the company releases its annual report for 2022 and quarterly report for 2023. In 2022, the company realized operating income of 1.182 billion yuan, + 49.01% compared with the same period last year, and realized net profit of 300 million yuan, + 98.13% over the same period last year. In the first quarter of 2023, the company achieved operating income of 192 million yuan,-4.48% year-on-year, and net profit of 51 million yuan,-24.76%, compared with the same period last year.

Integrated circuit business to maintain a high demeanor, rapid revenue growth. On a quarterly basis in 2022:

The operating income of 2022Q1-Q4 was 2.01GUP 2.99%, respectively, which was RMB 2.06 million, which was + 18.25%, 57.34%, 45.72% and 63.08% respectively compared with the same period last year. 2022Q1-Q4 realized a net profit of 0.68, 0.95, 0.95, 0.50, 0.87 million respectively, which was + 79.59%, 128.16%, 11.62%, 222.14%, respectively, compared with the same period last year. In 2022, the revenue of integrated circuit business was 608 million yuan, + 78.28% compared with the same period last year, and the gross profit margin was 60.37%, year-on-year-3.36pct. The revenue of Beidou terminal and operation business was 339 million yuan, + 11.00% compared with the same period last year, and the gross profit margin was 61.47%, + 0.70pct year-on-year. Security monitoring business achieved revenue of 231 million yuan, year-on-year + 60.09%, gross profit margin 33.80%, year-on-year + 2.29pct. In 2022, the company's overall gross profit margin was 55.38%, year-on-year-1.19pct. 2023Q1's overall gross profit margin was 68.53%, year-on-year + 8.90pct.

During 2022, the cost was well controlled and the net interest rate increased. In 2022, the company's period expense rate was 31.42%, compared with the same period last year-6.08pct. Among them, the rate of sales / management / R & D / financial expenses is respectively higher than that of the same period last year-2.92pct/-0.27pct/-2.95pct/+0.07pct. The company's R & D expenditure in 2022 was 137 million yuan, + 18.82% compared with the same period last year. At the end of 2022, the company had 411 R & D personnel, which was + 17.43% compared with the same period last year. In 2022, the company's overall net interest rate was 26.08%, which was + 8.76pct compared with the same period last year. The substantial increase in the company's net interest rate was related to the good cost control during the period and the substantial increase in other income and investment income. In 2022, the company's other income was 120 million yuan, + 42.15% compared with the same period last year, and the investment income was 13 million yuan, an increase of 1187.05% over the same period last year. 2023Q1's net interest rate is 26.06%, year-on-year-9.75pct. 2023Q1's management expenses and R & D expenses increased by 79.70% and 80.23% respectively compared with the same period last year, resulting in a decline in the company's net interest rate.

Contract liabilities increased significantly at the end of the first quarter, which may indicate strong demand downstream. The company's 2023Q1 inventory is 575 million yuan, + 8.66% compared with the beginning of the year, and the contract debt is 35 million yuan, + 69.93% compared with the beginning of the year. The company's inventory and contract liabilities increased at the end of the first quarter compared with the same period last year, and delivery may be accelerated in the future. The net cash flow generated by the company's investment activities in 2022 decreased by 26.55% compared with the same period last year, mainly due to the company's continued increase in laboratory investment and investment in fixed assets such as instruments and equipment. The net cash flow of fund-raising activities decreased by 136.62% compared with the same period last year, mainly due to the company's implementation of the employee stock ownership plan to buy back shares, the distribution of cash dividends, the payment of pre-equity incentives to withhold individual income tax, and the reduction of investment funds received in the implementation of equity incentives compared with the same period last year.

Investment suggestion: the company's main business includes integrated circuit business, Beidou navigation integrated application business, smart city construction and operation business. In the field of integrated circuits, the company has formed six series of more than 300 core products, and has become the core supplier in the field of domestic satellite navigation, broadband communications, video image processing, interface and other chip fields. In the field of Beidou navigation integrated application business, the company has mastered many advanced core technologies of satellite navigation. it has a strong technical reserve in the direction of high dynamic / high precision positioning technology, anti-jamming technology, Loran-C, pseudo-satellite enhancement system, integrated navigation and so on. In the field of smart city construction and operation services, the company has expanded a number of smart city construction and operation projects, such as Skynet, Xueliang Project, and actively build an unmanned intelligent platform. We predict that the company's net profit from 2023 to 2025 is 385 million yuan, 496 million yuan and 627 million yuan respectively, and the corresponding PE is 32.8,25.4,20.1 respectively. Coverage for the first time, giving a "overweight" rating.

Risk hint: the progress of new product development is not as expected, and the price of the product falls sharply.