Event

On August 18, 2023, the company released a semi-annual report that in the first half of the year, the company achieved operating income of 306 million, an increase of 12.89% over the same period last year, and a net profit of 40 million, down 18.92% from the same period last year.

Comment

1. The company's operating income has maintained steady growth. In the first half of the year, the company's revenue increased by 12.89% compared with the same period last year, mainly due to downstream demand growth. At the same time, the company increased its market development efforts and increased orders. By the end of the reporting period, the company had on-hand orders of 530 million yuan (including oral orders), an increase of 15% over the same period last year.

2. The overall gross profit margin of the company in the first half of the year was 45%, down 10 percentage points from the same period last year.

The decline of gross profit margin is mainly affected by the sales structure, localization, demand-side product price evaluation and other factors.

We believe that with the continuous decline of domestic components and chip prices, the company's overall gross profit margin is expected to stabilize.

3. In terms of expenses, the overall rate of the company remains stable, of which the R & D expenditure rate is 19.34%, down 1% from the same period last year, and the R & D investment is still high. The management expense rate is 6.47%, down 1% from the same period last year, and the cost is well controlled.

4. The company announced on July 8 that it intends to transfer the equity corresponding to 12.3493 million yuan of registered capital of Chengdu Mingke Microelectronics Technology Co., Ltd. at a price of 6.72 yuan per 1 yuan of registered capital. the company will also hold 20.61% of Minkos's equity, and this transaction is expected to increase investment income by about 24.82 million yuan.

5. We believe that the company's embedded computer products are successfully applied in airborne, missile-borne and other fields, and the revenue will maintain rapid growth with the continuous expansion of downstream weapons and equipment; with the continuous improvement of the informationization, digitization and modernization of the national defense and key areas, the demand growth rate of embedded computers is expected to be higher than the industry average; the price of domestic components is expected to decline so as to stabilize the company's gross profit margin. We expect the company's net profit from 2023 to 2025 to be 1.43,1.71 and 211 million yuan, an increase of 89%, 20% and 23% over the same period last year. The current share price corresponds to 27 times, 22 times and 18 times of PE, covering for the first time and being rated as "overweight".

Risk Tips:

The growth rate of downstream demand slows down; there is price reduction pressure on the company's products with the growth of volume; the price of upstream components remains high; and market competition intensifies.