Event: the company released the 2023 China report. In the first half of 2023, revenue reached 306 million yuan, an increase of 12.89 percent over the same period last year, and the net profit returned to the mother was 40 million yuan, down 18.92 percent from the same period last year.

Main points of investment

Orders increased, revenue in the first half of 2023 increased 12.89% compared with the same period last year. In 2023, the overall operating situation of H1 company was stable, driving downstream demand growth. At the same time, affected by the strengthening of market development, orders increased, achieving revenue of 306 million yuan, an increase of 12.89% over the same period last year. Affected by the sales structure, localization, demand-side product price review, and the increase in the number of R & D personnel, the salary of employees increased, and the net profit of returning home decreased by 18.92% compared with the same period last year. The sales cost of 2023H1 was 17 million yuan, an increase of 27.64% over the same period last year, mainly due to the increase in after-sales service charges. The company's R & D expenditure was 59 million yuan, which increased by 8.35% compared with the same period last year due to the increase of R & D personnel in the company's strategy. The management fee was 20 million yuan, down 3.50% from the same period last year, mainly due to the reduction of share payment fees and the company's suspension of drawing safety production fees.

Implementation of the restricted equity incentive plan: on May 16, 2023, the company held a meeting to examine and approve the restricted stock incentive plan, with a total of no more than 255800 shares to be granted to the incentive object, accounting for about 0.51 per cent of the company's total share capital of 50.4983 million shares at the time of the announcement of the draft incentive plan.

Sell shares to promote the sustained and healthy development of the company: on July 8, 2023, the company issued an announcement, it was announced that the equity corresponding to 12.3493 million yuan of registered capital of Chengdu Mingke Microelectronics Technology Co., Ltd. was transferred to Anhui Traffic Control Investment Information New Infrastructure Private Equity Fund Partnership, Hefei Dunchuang Equity Investment Partnership, Sun Wei, Huang Min and Luo Jie at a price of 6.72 yuan per 1 yuan of registered capital. It will help to reduce the company's investment cost, control the investment risk, improve the efficiency of the use of funds, at the same time increase the investment income, and help the company to realize the increment of the investment project.

High level of scientific innovation, strong technical strength and R & D capabilities: the company pays attention to research and development and innovation capabilities, as of the end of 2023H1, there have been 41 patents, 168 software copyright. 2023H1 R & D investment accounts for 19.33% of business income, the company's strong R & D capability is conducive to the continuous development of performance, help to enhance market competitiveness, break through the existing competition pattern, and be able to compete with domestic first-class enterprises. At the same time, we should attach importance to the introduction of talents, formulate an effective incentive mechanism, and continue to introduce technical talents in the future to ensure the company's sustainable innovation ability.

Profit forecast and investment rating: based on the company's leading position in the military embedded computer industry, we maintain our previous forecast of 2023-2025 net return of RMB 1.31x172 million; the corresponding PE is multiple of 29-22-18, maintaining the "buy" rating.

Risk tips: 1) the risk of technology development; 2) the risk of purchasing core raw materials; 3) the risk that the income structure is affected by the needs of downstream customers; and 4) a high degree of dependence on national key sector groups.