[Incident, BL: E_, Ministry of Public Administration M, M, Ary2] 023 Semi-Annual Report. The company achieved revenue of 147 million in the first half of 2023, a year-on-year decrease of 19.67%. Net profit to the mother was 115 million yuan, a year-on-year decrease of 163.13%.

Key points of investment

The company's profit declined in the first half of 2023, and short-term pressure on Q2 results was under pressure. 2023Q2's revenue was 69 million yuan, down 57.93% year on year, and Q2 net profit was -06 billion yuan, down 114.81% year on year.

The main reason for the decline in revenue in the first half of the year was the decline in sales revenue of broadband mobile communication devices. The main business, broadband communications, saw a year-on-year decline of -25.82% in the first half of the year, and gross profit of -1.87% year-on-year. Judging from the three fees, 2023H1 sales expenses increased by 7.52% year-on-year, indicating that the company is actively expanding its market. R&D expenses in the first half of the year were 95 million yuan, an increase of 69.74% over the previous year. This was mainly due to the company's increase in R&D investment and a decrease in cost capitalization. Q2 The company's performance is under pressure in the short term. With future investment in product development and new production, the company's performance is expected to pick up.

The 5G business is gradually developing, and broadband communication has been developing for a long time. In the first half of the year, the company promoted the development of several projects in the field of broadband communications, and obtained four model development tasks in the network chain business, which is expected to be carried out in batches between the end of the year and next year. At the same time, the company continues to invest in continuous research and development of small 5G base stations, and has obtained relevant network access test certificates and model certificates issued jointly by the Ministry of Industry and Information Technology, completed the verification of first-generation integrated stations, and passed mobile networking tests. At the same time, the company has won bids for 5G projects in various industries to expand the company's business direction. Furthermore, the 5G private network project of the company and COMAC is about to enter the project acceptance stage, which is expected to further improve the application of the company's 5G products. With the country's informatization construction and 5G development, downstream demand is expected to further increase, boosting the company's performance.

The business is concentrated on military informatization, and broadband communication is expected to expand. The company is the first broadband communication system, the “private network broadband mobile communication system, a general equipment model development project”. As the main development unit, it undertook the development and production tasks of broadband access equipment, and continued to promote the development of communication to broadband. China's military broadband communication system started relatively late. During the 14th Five-Year Plan period, emphasis was placed on advancing the modernization of weapons and equipment, and there was a strong demand for military informatization. China's defense spending continues to increase, military spending is skewed towards equipment, and demand for private network broadband mobile communication equipment will continue to rise. Since its development, the company has been focusing on the field of military broadband communications. Related products have formed a “chip-module-terminal-base station-system” full-industry chain layout, and has successfully achieved independent research and development. Based on current technology and industry position advantages, the expansion of broadband communications will further enhance the company's performance.

Profit forecast and investment rating: Based on the company's leading position in military broadband communications and considering the pace of downstream equipment expansion, we maintain our previous forecast and expect net profit of 257/357/465 to be 257/357/465 million yuan; corresponding PE is 37/27/21 times, respectively, maintaining the “buy” rating.

Risk Alerts: 1) Downstream demand and order fluctuations; 2) Risk of bad debts in accounts receivable; 3) High risk of customer concentration.