Event: the company released a semi-annual report for 2023, 2023H1 achieved revenue of 2.258 billion /-7.4%, return to the mother net profit of 77 million / + 608.12%.

2023H1's homing net profit is close to the upper limit of the performance forecast, and Q2 grew by 58.3% in a single quarter, in line with expectations. 2023H1 achieved a net profit of 77 million, close to the upper limit of 80 million of the previous performance forecast. Q2 revenue in a single quarter was 1.401 billion / + 0.8%, and its net profit was 133 million / + 58.3%, which was in line with expectations. 2023H1 company's overall gross profit margin 49.6%/+2.5pct, in which the main business gross profit margin is as high as 58.6% pull slope, overall net profit margin 3.4%/+3.5pct, asset-liability ratio 43.5%/-11.8pct, interest protection ratio 1.9x / + 1.1x, profitability and solvency double rise, R & D expenditure rate 19.0%/-1.5pct, R & D investment intensity slightly downward but still maintain a high level The cumulative number of patent applications reached 505, Q2 single-quarter overall gross profit margin and net profit margin have achieved year-on-year and month-on-month improvement.

Excluding the impact of Septux, 2023H1's revenue is + 4.5% year-on-year, and new terminal products and overseas expansion boost profitability. The main reason for the decline in revenue growth of 2023H1 is that 2022H1 Sepuller contributed 277 million of revenue within the consolidated range, resulting in a high base. Excluding this effect, 2023H1 revenue was + 4.5% year-on-year, and private communications business grew steadily. The significant improvement in profitability is mainly due to, on the one hand, the continuous innovation of the terminal, the gross profit margin 61.8%/+7.1pct, and on the other hand, although the proportion of overseas revenue has briefly dropped to 46.1%/-7.1pct due to the time point of revenue recognition, the gross profit margin has risen sharply to 67.6%/+11.8pct, nearly twice that of China, and exchange gains and losses caused by exchange rate fluctuations have increased by 15 million compared with 2022H1.

"step by step to make a profit", upgrade product layout, overseas deep ploughing "Belt and Road Initiative" along the market. 2023H1 continues to promote fine operation and business process reform, setting the reference threshold of gross profit margin when taking orders, relatively weakening the concept of market share, "step by step to make a profit". Centering on the product strategy of "2D3Band 1", on the one hand, it strengthens the traditional narrowband service, launches a new generation of TETRA terminals and a new generation of portable integrated base stations, continuously focuses on customers in core industries such as public safety, and at the same time develops new commercial terminals to meet the communication needs of small and medium-sized enterprises. On the other hand, it promotes growth and exploration services, and performs well in operators'5G extended skin base station collection projects. Released rugged large screen industry application terminal PNC460 and multimode intelligent explosion-proof terminal PDC680, newly deployed 80 + public college fusion platforms, while intelligent dispatching deepened NLP application, enriched data tags, formed a multi-mode terminal technical solution in the field of low-orbit satellite communications, and EMS focused on new energy and automotive electronics. 2023H1 products provide escort services for MGM Macau International Sailing Race, Hytera HyTalk platform and PoC terminals are used in large security companies in Thailand, 5G broadband products have won bid operator projects in many countries in the "Belt and Road Initiative" region, and new easy-to-deploy miniaturized command and dispatching platform products have been released for ASEAN, Latin America, Africa and other places.

Investment suggestion: the company's traditional narrowband business is well expanded, 5G broadband + public college integration + satellite communications + intelligent pointing + EMS multi-point blooming. It is estimated that the return net profit of the company from 2023 to 2025 is 448cm 573pm 727 million, the EPS is 0.231pm 0.39RMB, and the current stock price is 26x/20x/16x corresponding to PE. We believe that the company's growth business has broad prospects for development, profitability can be further improved, and be given a "recommended" rating.

Risk hint: for the risk of litigation between the United States and Australia, the demand along the "Belt and Road Initiative" line is lower than expected, the progress of the expansion of new terminal products is slow, and trade frictions are intensified.