Summary of the report

Event: the company announced on August 22nd that 2023H1 realized revenue (437 million yuan,-16.10%), net profit (48 million yuan,-56.91%), gross profit margin (25.48% mai 15.16 pcts), and net profit rate (10.88% mai 10.31 pcts). 2023Q2 realized revenue (272 million yuan, year-on-year-16.60%, month-on-month + 64.20%), homing net profit (27 million yuan, year-on-year-60.56%, month-on-month + 32.76%), gross profit margin (22.32%, year-on-year-17.12pcts, month-on-8.33pcts), net profit rate (9.98%, year-on-year-11.13pcts, month-on-2.36pcts).

Microwave electric vacuum devices lead private enterprises, and scientific and technological innovation drives development. The company is the former state-owned 776 factory, is one of the national designated military microwave vacuum devices "two factories, two institutes" production, scientific research base, the company mainly engaged in traveling wave tube, magnetron, inflatable microwave switch tube, microwave solid-state devices, nuclear industry equipment, pressure vessel vacuum measurement and control components and other products development and production, and widely used in radar, satellite communications, electronic countermeasures, nuclear industry, new energy and other fields. The company always adheres to the Guoguang concept of "realizing the ideal with wisdom and creating resplendence with science and technology", and constantly promotes technological innovation to enhance the company's core competitiveness.

The main microwave devices business is affected by price reduction and tax reform, and the overall revenue performance fluctuates. The revenue of 2023H1 Company (437 million yuan,-16.10%) decreased compared with the same period last year, mainly due to the decline in the revenue scale of microwave devices, and the significant negative growth in its net profit (48 million yuan,-56.91%). It is mainly because some models of microwave devices are affected by the tax reform of the whole industry. The company's gross profit margin (25.48% Maxim 15.16pcts) dropped sharply, mainly due to the price reduction of some models and the increase in the proportion of nuclear industrial equipment and components with low gross margin. Under the influence of lower gross profit margin, the company's net profit margin (10.88% mai 10.31pcts) decreased significantly compared with the same period last year. Looking at 23Q2 alone, the company achieved revenue (272 million yuan, year-on-year-16.60%, month-on-month + 64.20%), return-to-mother net profit (0.27 billion yuan, year-on-year-60.56%, month-on-month + 32.76%), gross profit margin (22.32% 6, year-on-year-17.12pcts, month-on-month-8.33pcts), net profit rate (9.98%, year-on-year-11.13pcts, month-on-month + 2.36pcts), overall revenue performance decreased significantly year-on-year, month-on-month increased In line with the company's seasonal revenue recognition law.

The third rate has increased, and R & D expenses have decreased compared with the same period last year. The sales expenses of 2023H1 Company (8.013 million yuan, + 1.91%) increased, while the management expenses (26 million yuan,-8.58%) decreased compared with the same period last year, mainly because the year-end bonus of 2023H1 included in the management expenses was lower than that of the same period last year, and the financial expenses (- 5.3342 million yuan, + 9.50%) increased compared with the same period last year, mainly due to the decrease of 2023H1 interest income. The R & D expenditure (20 million yuan,-30.91%) decreased significantly, mainly due to the completion of some R & D projects in 2023H1. On the whole, the company's three rates (6.62% score 0.73 pcts) have increased compared with the same period last year.

The operating cash flow has improved compared with the same period last year, and there may be some delays in the confirmation of product delivery. The net operating cash flow of 2023H1 Company (5.71 million yuan) increased compared with the same period last year, mainly due to the increase in sales rebates of 2023H1 compared with 2022H1 and the decrease of actual warehouse tax, while the net investment cash flow (- 39 million yuan) decreased significantly, mainly due to the increase in investment in 2023H1 investment projects. The net cash flow of fund-raising (- 31 million yuan) increased compared with the same period last year. This is mainly due to the impact of 2023H1's repayment of 30 million of short-term bank loans due and about 50 million of cash dividends paid in the same period last year. 2023H1 inventory (253 million yuan,-1.56%) decreased, issued goods (14 million yuan, + 27.27%) and inventory goods (35 million yuan, + 9.38%) increased compared with the same period last year. We believe that after the order is confirmed, it will further increase the company's profits.

Fund-raising projects are aimed at improving the capacity of research and delivery, and further expand the existing business capacity. The company invested 908 million yuan to build the "Scientific Research and production complex Building and the Construction Project of Aerospace Communication Technology Research and Development Center", which will focus on pre-research on products such as traveling wave tubes. "production Line Project of Special Electric vacuum Devices", "industrialization Construction Project of non-standard equipment and CHZ resistant Valves in Nuclear Industry" and "industrialization Construction Project of pressure vessel Safety Accessories" aim to enhance the company's existing business development and delivery capabilities. It is expected that after the fund-raising project reaches production, the production capacity will be further improved and the company's performance will be thickened.

The demand for low-orbit satellite traction microwave devices and the trend of domestic substitution for nuclear power products and safety accessories are determined. The company is the only private enterprise capable of developing and producing TWT and other special electric vacuum devices, and the special pumps, valves and ITER supporting equipment in the nuclear industry are supplied exclusively by China. In addition, the vacuum testing instruments for civilian products are the only products that have passed the appraisal of the industry committee and the national explosion-proof certification, and the technology has reached the domestic leading level. At present, the company's main business can be divided into three major business lines, microwave devices business, nuclear industry equipment and components business and pressure vessels and other civilian products business, specifically: ① microwave devices business:

The high power amplifier in satellite communication mainly uses the electric vacuum device. The space traveling wave tube (STWT) used in the satellite communication field plays the role of final signal amplification and is the core component of the payload on all kinds of satellites. With the continuous improvement of the demand for communication data traffic, it is expected that the launch of Leo satellites in China will further speed up and the demand for traction TWT will increase in the future. At present, domestic space TWT suppliers are limited to "two factories and two institutes". Combined with long-term technology accumulation and the flexibility of private enterprises, the company is expected to quickly seize the incremental market. In addition, the company expands the field of solid-state devices based on the accumulation of microwave devices, and its products are oriented to airborne and missile-borne phased array radar and electronic countermeasure equipment, which is expected to further benefit from the incremental assembly of advanced weapon platforms and the improvement of the information rate of national defense equipment in the future.

② nuclear industrial equipment and components business:

The company's nuclear industry equipment and components business can be divided into three directions. In terms of ITER, the company mainly supplies divertor, cladding and hot helium leak detection equipment. In the field of special pumps in the nuclear industry, the company has developed all-metal gas circulation pumps since 2015. At present, two types of gas circulation pump prototype products have been developed and have entered the stage of testing. In terms of special valves in the field of nuclear industry, the radiation-resistant small valve project of the Ministry of Science and Technology undertaken by the company has successfully completed the development of DN3 small valves and achieved batch delivery. It is expected that after reaching production, the fund-raising project will further expand the existing business capacity and increase the company's revenue scale.

③ vacuum devices and other civilian products business:

In the field of civil products, the company's core products are vacuum measurement and control components, including vacuum switches and arc extinguishers, civil aviation dining cars, vacuum storage cabinets, vacuum industrial furnaces and other vacuum equipment. The domestic vacuum testing instrument developed by the company has passed the appraisal of the National dangerous Chemical Storage and Transportation equipment Technology and Informatization working Committee and the explosion-proof certification of the National explosion-proof Institute, and its comprehensive performance has reached the domestic leading and international advanced level. The company's fund-raising project is expected to increase the annual production capacity of 137000 sets of related products, corresponding to a revenue scale of 620 million yuan. After reaching production, the project will further increase the market share of the company's related business and accelerate the process of domestic substitution.

Investment suggestion: the company is the only private enterprise in China that can develop and produce special electric vacuum devices such as traveling wave tubes, and has a leading position in the field of equipment in the nuclear industry and civil pressure vessel accessories. The specific investment suggestions are as follows: 1. The company deepens the field of electric vacuum tubes and gradually expands the business of solid-state devices. The change of product structure and the "volume-for-price" of downstream customers may still have a continuous impact on the company's medium-and short-term gross profit margin. However, the scale effect accompanied by the increase in production capacity will bring the company gross profit margin repair. 2. Some models of the company's nuclear industry equipment and components business have entered the stage of delivery verification, or benefit from the improvement of the localization rate and the rapid growth of demand for new units; 3. The company's pressure vessel accessories products are in a leading position in China, and the market share of related products is still at a low level. With the release of production capacity in the future, domestic substitution will be accelerated and will become an important growth point of the company for a long time. We estimate that the company's operating income from 2023 to 2025 will be 1.031 billion yuan, 1.365 billion yuan and 1.626 billion yuan respectively, the net profit will be 169 million yuan, 230 million yuan and 301 million yuan respectively, and the EPS will be 1.56 yuan, 2.12 yuan and 2.78 yuan respectively.

Risk tips: capacity construction is not as expected, product price fluctuations, downstream demand fluctuations and so on.