Event: the company released a semi-annual report on August 29, 2023, with revenue of 708 million in the first half of 2023, an increase of 13.11% over the same period last year, and a net profit of 7 million yuan, an increase of 107.11% over the same period last year.

Main points of investment

H1 achieved revenue of 708 million, a year-on-year increase of 13.11%, sufficient orders, and demand continued to advance: during the reporting period, the company's military electronics business revenue was 508 million, up 9.13%, and boat business revenue was 188 million, up 23.56%. Both of the company's two major businesses have upward flexibility. Q2 achieved revenue of 390 million, an increase of 10.37% over the same period last year, a net profit of 2.2744 million yuan, an increase of 105.15%, a decrease of 12.94pct, a net profit rate of 11.37%, a year-on-year increase of 26 million, a decrease of 14.18%, a year-on-year increase of 95 million, a year-on-year increase of 3.22%, and a financial expense of 76 million. Year-on-year increase of 3.10%, income tax expenses 12 million, year-on-year increase of 45.77%, mainly due to the increase in income tax caused by the increase in the total profits of profitable subsidiaries, a total of 27 million in R & D, a decrease of 9.61% over the same period last year.

Invigorating assets has achieved initial results, and the fixed increase plan has been carried out in an orderly manner: the company disclosed its reply report on the application for issuing shares to specific targets on August 11, 2023, which has been accepted by the listing and examination Center of the Shenzhen Stock Exchange. the total amount of funds raised by the company does not exceed 680 million yuan, which will be used for the construction project of the Microelectronics Research Institute, supplementary working capital and repayment of bank loans. Sunbird Holdings subscribes for all the shares issued by the company in cash. If the issue is successfully completed, the company's anti-risk ability and capital adequacy will be further improved.

Military electronics and boat manufacturing acceleration trend, the company has great development potential: the company is committed to high-performance microwave electronics, navigation equipment and product R & D, design and manufacturing, from the industry point of view, the company's two main business sectors, military electronics and intelligent boats are in the stage of rapid development and strong demand. During the 14th five-year Plan period, the military electronics industry will usher in rapid growth, and relevant policies have been introduced in recent years, which are accelerating the construction process of national defense informatization in our country. The number of new orders received by China's shipping enterprises has increased significantly, and the industry has the potential for development. From the point of view of the company's own advantages, the company occupies an important market share of domestic microwave circuits and components. in recent years, the formal commissioning of the production line in Chengdu High-tech West Zone has led to the further growth of the company's military electronic business, and it is expected that it will continue to achieve saturated production this year.

Profit forecast and investment rating: based on the broad prospects of downstream applications and the company's leading position in the military electronics field, we adjust our 2023-2025 homing net profit forecast to RMB 0.15 (- 1.50) / 0.68 (- 1.68) / 0.85 (- 213) million, corresponding to a PE of 446 prime 102 pound 81 times, maintaining the "overweight" rating.

Risk tips: 1) policy and market risk; 2) high risk of accounts receivable; 3) risk of loss of core technical personnel and technical leakage.