In the first half of 2023, the sales revenue was 361 million yuan, + 100.64% compared with the same period last year, and the net profit was 29.5191 million yuan, + 277.55% compared with the same period last year. 2023Q2 realized revenue of 310 million yuan, + 84.28% compared with the same period last year.

During the reporting period, the company continued to promote management reform and efficiency improvement, actively expanded the domestic market of radar machines, achieved substantial revenue growth, and significantly improved profitability. Considering the high threshold of air defense early warning radar business, the replacement of domestic product models is expected to bring huge market space, the company has rich experience in the industry, strong competitive strength, and maintain the "overweight" rating.

Arms trade has led to income growth, and profitability has improved significantly. In the first half of 2023, the sales income was 361 million yuan, + 100.64% compared with the same period last year; the net profit was 29.5191 million yuan, + 277.55%, and the non-return net profit was 21.8937 million yuan, + 192.42% over the same period last year. During the reporting period, the company actively promoted the business expansion of the military trade market, and 23H1 achieved 110 million yuan in military trade revenue, leading to a rapid increase in overall income. With reference to industry practice or due to the high gross profit margin of the military trade business, the overall gross profit margin is from + 2.47pcts to 27.97% compared with the same period last year. The company's increased investment in R & D, tackling key problems of cutting-edge technology and the promotion of pre-research projects led to R & D expenses from + 24.55% to 68.3027 million yuan compared with the same period last year; management expenses increased slightly compared with the same period last year, from + 11.68% to 26.1621 million yuan, and sales expenses from + 2.06% to 3.7389 million yuan, no significant change; but due to faster income growth, the expense rate dropped sharply to 23.39% during the period. Taking all the above factors into account, the company's net interest rate during the reporting period was from + 17.4pcts to 8.17%. In the single quarter, 2023Q2 realized income of 310 million yuan, year-on-year + 84.28%, home net profit of 46.5937 million yuan, year-on-year + 361.47%, non-mother net profit of 39.01 million yuan, + 328.90%.

Product delivery is smooth, the company speeds up production, accounts receivable recovery cash flow is positive. At the end of the period, the company's inventory decreased by 9.8% to 398 million yuan compared with the beginning of the period, mainly due to a decrease of 99.75% to 279000 yuan in issued goods, indicating that downstream income was confirmed smoothly; the product increased by 50.99% to 246 million yuan, which is expected to be realized after the production and delivery of the product. The company's payback is good, with accounts receivable ranging from-51.76% to 418 million yuan compared with the same period last year. With the substantial improvement in the company's sales performance, the cash inflow of H1 sales goods in 2023 was + 508.44% to 782 million yuan compared with the same period last year. The company's cash flow improved significantly, and the operating net cash flow of H1 company in 2023 was + 192.42 yuan to 281 million yuan compared with the same period last year, from negative to positive.

Deep ploughing radar firmly cast technical barriers, product iterative market space is broad. The company is the main supplier of air defense early warning radar under No. 23 Institute of Aerospace Science, Technology and Industry. Its main products are radar and supporting equipment, radar parts, and products for domestic military customers and military groups. We believe that the company has entered the fast track of development: 1. The company has continuously focused on the air defense early warning radar business for decades, with a high market share in the air defense early warning field and a leading position in the industry; 2. With policy support, the iteration of air defense early warning radar is expected to accelerate, and the company is expected to fully benefit from the huge market space brought about by the upgrading of domestic product models. 3. The company relies on the No. 23 Institute of the second Hospital to obtain the technical support of shareholders, has the overall channel advantage of air defense system, the layout of the company's industrial chain is perfect, and has a long-term competitive advantage.

Risk factors: the company's technology research and development is not as expected; the company's product structure is single and its revenue depends on the old model products; the company's main customers are highly concentrated; the military price review is uncertain; and the company's fund-raising projects are not as expected.

Profit forecast, valuation and rating: considering the rapid growth of the company's revenue and profitability, the annual return net profit forecast of the company in 2023-24-25 is 1.8 billion yuan, respectively, and the corresponding EPS forecast is 0.52, 0.63 and 0.75 yuan respectively. The company's current stock price is 25.66 yuan, corresponding to the 2023-24-25 annual PE is 49-41-34 times. At present, comparable companies Guorui Technology, Situang Electronics and Naruidar Wind unanimously expect that the PE in 2023 will be 38 times that of 28-40-45, with an average of 38 times. Considering the company's focus on military radar development, its competitive advantage is significant, and its market share is expected to increase. Moreover, as the first core military listed company of the Aerospace Science and Industry Group, the company pays more attention to the market than the comparable company, giving the company 50 times PE in 2023, with a target market capitalization of 9 billion yuan. Maintain the target price at 27 yuan. Maintain the "overweight" rating.