According to the semi-annual report released by the event company, the total operating income in the first half of 2023 was 306 million yuan, an increase of 12.89 percent over the same period last year, and the net profit was 40 million yuan, down 18.92 percent from the same period last year.

Revenue achieved rapid growth, gross profit margin continued to be under pressure. 2023H1 company operating situation is stable, downstream demand growth, increased orders, revenue of 306 million yuan (YOY+12.9%), Q2 single-quarter revenue growth, reaching 237 million (YOY+39.7%). 2023H1 returned to the mother of 40 million net profit (YOY-18.92%), Q2 single-quarter results of 42 million (YOY+1.8%), the growth rate to become a regular employee.

The company's 23H1 net profit fell compared with the same period last year, and gross profit margin was under pressure. Due to higher requirements for localization of the company's products, gross profit margin is slightly fluctuated by product structure and generation changes, superimposed demand-side product price review and other factors, 23H1 gross profit margin of 44.8%, a year-on-year reduction of 9.8pct, showing a continuous multi-quarter decline, and is expected to gradually stabilize.

During the company's 23H1, the expense rate (including R & D) is 31.5%, which is lower than the same period last year (0.9pct), and the cost control effect is good. Among them, the management expense rate and R & D expense rate are 25.8% and 19.3% respectively, the 1.1pct and 0.8pct rates are reduced respectively, the sales expense rate is 5.4%, and the uplink 0.6pct.

Operating cash flow increased by 65.4% compared with the same period last year, mainly due to the improvement of the payback situation and the increase in the amount of government subsidies over the same period.

The company's core orders are full, and the development of new areas contributes to sustainable development. The company has successfully realized the full self-control of components, raw materials, software operating systems and so on, and realized batch application in many models of equipment. The order on hand is 530 million yuan (including oral orders), accounting for 98% of the 22-year revenue, an increase of 14.7% over the same period last year.

It is planned to issue convertible bonds, and the layout of production capacity is positive. At present, the company's capacity utilization rate is high, with the rapid growth of the number of new research projects and orders on hand, capacity needs to be expanded. Although the IPO fundraising project was put into production at the end of 2023, it still lags behind demand. Therefore, the company plans to issue 411 million convertible bonds for embedded computer production expansion, R & D center upgrade and replenishment. The expansion project has been put into production for 24 years and reached production in 27 years. After reaching production, the annual income is expected to increase by 562 million yuan and the net profit is expected to be 86 million yuan. We believe that with the rapid development of downstream aircraft, missiles and other key areas and the improvement of intelligent equipment, the growth of demand for installation and transformation of key models will effectively promote the release of the company's production capacity.

Transfer part of the equity of Mingkos, increasing the investment income by about 25 million. The company's 2021 overseas investment Mingcox, cut into the field of digital-to-analog conversion chips, the company recently plans to reduce its shareholding to 20.6%, is expected to increase investment income of about 24.8186 million yuan. Mingke focuses on the design and development of high-speed and high-precision ADC, helping the company to promote the localization of raw materials and reduce conversion costs; at the same time, driven by the company's downstream market resources and word-of-mouth, Minks has achieved rapid development, with 23H1 revenue of 21.111 million yuan, an increase of 118.1% over the same period last year, with obvious synergy. In addition, Mingke Si business is improving, with the continued expansion of revenue, future performance is expected to change from negative to positive, and does not rule out the possibility of independent listing, the company will fully benefit.

Investment suggestion: the company's net profit from 2023 to 2025 is expected to be 1.16 PE 1.42 / 176 million respectively, with a compound growth rate of 32.5% over the next three years. Continuous coverage, giving a "recommended" rating.

Risk Tip: the risk of military orders falling short of expectations and product price fluctuations.