The core supplier in the field of power electronics and automatic control, intelligent mechanical and electrical power: Galaxy Electronics is an integrated enterprise group integrating new energy, artificial intelligence, special equipment, intelligent network equipment and other businesses. Among them, the main products of special equipment business include mechanical and electrical integrated management system, special military high-frequency switching power supply, special motor control system, vehicle oxygen supply device and related application software, which are widely used in the military field. As of the first half of 2023, the business revenue of intelligent mechanical and electrical products accounted for 75.55%. The company laid out military products in advance and participated in pre-research and scientific research of key model projects in the whole army for a long time. The R & D level and production scale are in a leading position in the same industry. Downstream customers are stable and sticky, and the performance is strong and stable.

In the later period of the 14th five-year Plan, the demand for intelligent mechanical and electrical equipment of the military industry is expected to accelerate, occupy the core link of the industrial chain and fully enjoy the dividend of industry expansion: the outline of the 14th five-year Plan clearly puts forward the need to speed up the modernization of weapons and equipment, the upgrading of weapons and equipment and the development of intelligent weapons and equipment. Since the reform and opening up, the proportion of GDP in China's national defense expenditure has remained between 1.2% and 1.35% all the year round. As an important part of national defense, defense expenditure on military electronics will continue to increase. With the continuous progress of China's national defense and military modernization, the new equipment is accelerated, and the company's products are in strong demand. Galaxy Electronics ploughs the field of intelligent mechatronics, occupies the core link of the industrial chain, cooperates closely with various services and arms, and is expected to continue to benefit from the high prosperity of the military industry in the future.

Technology research and development as the core, innovation capability expansion and increment: subsidiary Tongzhi Mechatronics has the national military industry "four certificates" license qualification, has been awarded as the key high-tech enterprises of the National Torch Plan, Anhui innovative pilot enterprises, Anhui software enterprises, Hefei science and technology small giant enterprises, Hefei intellectual property demonstration enterprises. By 2022, Tongzhi Mechatronics has a total of 173 patents, including 28 invention patents. In the research of new special intelligent mechatronics, it has been applied in the field of traditional military equipment, equipment support and emerging military equipment, which helps to enhance the market competitiveness of special intelligent electromechanical business, and the new products are expected to achieve sustained batch production in 2023 and expand the scale of business.

Profit forecast and investment rating: national interests and security need to have advanced intelligent mechanical and electrical technology. China is in the stage of accelerated development of national defense information, and the demand for intelligent mechanical and electrical is expected to be strong. In addition, Galaxy Electronics has been ploughing the intelligent mechanical and electrical field for many years, and based on the company's leading position in the industry, it is expected to benefit from the downstream volume. We estimate that the company's homing net profit from 2023 to 2025 will be 231 million yuan, 266 PE, 298 million yuan, corresponding to a multiple of 27-23-21, covering for the first time and giving a "buy" rating.

Risk tips: 1) special equipment price review risk; 2) market competition risk; 3) raw material price fluctuation and supply shortage risk.