Key points of investment:

We have been deeply involved in the industry for many years to build a leading domestic enterprise. Xintian Technology's products mainly include RF devices, RF metal components and RF structural parts. Customers cover well-known enterprises at home and abroad. The company's 5G filter and antenna production capacity was gradually released, and the 2017-2022 revenue CAGR reached 17.28%.

The penetration rate of 5G continues to increase, and the volume and price of RF devices are rising. According to GSMA data, 2G/3G will soon reach a peak of network withdrawal. Base stations will evolve from 2G/3G to 5G. From 2022-2030, the global 5G network penetration rate will increase from 12.25% to 54%. China's 5G base station construction is at the forefront of the world, accounting for 73% of the number of 5G base stations in the world. The capital expenditure support of Chinese operators continues to increase, promoting the further completeness of China's 5G base station layout. The coverage rate of overseas 5G base stations is low. Currently, we are in a period of accelerated coverage of 5G base stations. The number of base stations built is expected to usher in significant growth. There is a lot of room for growth in filters and antennas. It is estimated that the global base station filter and antenna growth space from 2023-2025 will be 250/252/25 billion yuan. 5G base stations have strong demand for filters and antennas. The demand for 5G base station filters is 8-32 times that of 4G base stations, and the price of 5G base station antennas is about 4 times that of 4G base stations. In addition, the number of base stations around the world continues to increase, and the volume and price of RF devices is rising.

Downstream expansion categories have been broadened, and overseas 5G has accelerated growth. 1) The company has been deeply involved in the industry for nearly 20 years, has accumulated deep technical advantages, and greatly improved production efficiency. The company's per capita revenue generation and per capita profit generation are at the leading level in the same industry. 2) The company continues to expand downstream, and has now expanded new categories of 5G filters and antennas. The company is also continuously developing domestic and foreign markets such as new energy, medical care, and consumer electronics. 3) Adhering to the big customer market development strategy, the company has established long-term and stable cooperative relationships with well-known domestic and foreign companies such as downstream Nokia, Sanmina, and Flextronics. Currently, the construction of 5G base stations in China is slowing down, shifting from rapid expansion to steady progress, with more emphasis on 5G application implementation. However, 5G base stations in overseas regions are in a period of rapid coverage. The company has cooperated with major global telecommunications equipment vendors for many years, and is expected to fully benefit from the accelerated dividends of overseas 5G network coverage.

Profit forecast, valuation analysis and investment suggestions: The company's net profit for 2023-2025 is expected to be 0.67/0.86/111 million yuan, and EPS is 0.35/0.45/0.58 yuan. The closing price on August 23, 2023 was 15.63 yuan/share, corresponding to PE of 44.6/34.8/26.9 times. It was covered for the first time, and was given a “holdings increase - A” rating.

Risk warning: risk of loss of overseas customers; overseas 5G construction falling short of expectations; risk of exchange rate fluctuations; risk of majority shareholders' holdings reduction; risk of accounts receivable ratio being too high.