The company is a leading supplier of highly reliable sensors in China, and its main products include pressure / temperature and humidity / acceleration / displacement sensors and sensor network systems, which are used in aerospace, weapons, rail transit, construction machinery, metallurgy and other fields. With its leading technical capabilities and long-term supporting experience in military and civilian products, it is expected that the company will benefit from the high boom in aerospace and the domestic replacement process of high-end industrial sensors; at the same time, the expansion of sensor network systems downstream is expected to continue to open up room for growth. Cover for the first time, giving a "buy" rating.

The leader of highly reliable sensors has grown rapidly in recent years. The company focuses on the R & D, design, production and sales of high reliability sensors and sensor network systems, the main products include pressure / temperature and humidity / acceleration / displacement sensors and sensor network systems, etc., used in aerospace, weapons, rail transit, construction machinery, metallurgy and other fields, has independent research and development capabilities and core technologies in high reliability sensor design, packaging and testing, sensor network systems. It can meet the needs of different use environments. Benefiting from the magnificent demeanor of the aerospace industry and domestic substitution in the industrial sector, the company's revenue has grown rapidly in recent years, and its profitability has improved obviously. revenue has increased rapidly from 130 million yuan in 2019 to 276 million yuan in 2022, with CAGR reaching 28.5%. The net profit has increased from 21 million yuan in 2019 to 81 million yuan in 2022, with CAGR reaching 56.8%. The net interest rate has increased from 15.9% in 2019 to 29.4% in 2022.

With the rapid development of sensor market, there is a broad space for domestic production in the industrial field. The sensor is the bridge between the physical world and the digital world. As the main technology trend of the industry, MEMS sensor is a micro integrated system composed of sensor, information processing unit, actuator and communication / interface unit, which has the characteristics of small size, low cost, low power consumption and so on. Benefiting from the demand of industry, automotive electronics and other fields, the domestic sensor market in 2020 is about 251 billion yuan, compared with the same period last year + 15%. The market size of MEMS is about 73.67 billion yuan, and + 23% compared with the same period last year. It is estimated that the domestic MEMS market will be about 104.47 billion yuan in 2022 (according to Sadie consultants), which has a broad space. Benefiting from the high prosperity in the aerospace industry, the domestic demand for military sensors is increasing rapidly, while there is a large gap in localization in the industrial sector, and more than 90% of the middle and high-end smart sensors are still imported (according to the head Leopard Research Institute). The competition pattern of the sensor industry is relatively scattered, and the main participants in the military field are scientific research institutes under the military Industry Group, with high requirements for environmental adaptability of products, high barriers to entry into the industry, and strong continuity of suppliers; in the industrial field, foreign manufacturers have technological and cost advantages, while local manufacturers mainly develop non-standard products according to the needs of customers in different scenarios to establish differentiated competitive advantages.

Military products build a solid foundation for growth, while civilian products open up long-term space. The company ploughs the sensor industry, the core team has a profound technical background, technology + channels to build the core moat. In the military field, the company has supported major military industrial groups for a long time, and has participated in manned spaceflight and other major projects for many times. the product indicators are consistent with those of the country's top military research institutes, and it is expected that the core will benefit from the strong demand in the aviation field. at the same time, commercial aerospace, missiles and other high-prosperity fields have great potential. In the civil field, the company has a leading technical index of pressure sensors, temperature and humidity sensors, and has a high market share among leading customers such as Zheng Coal Machinery and CRRC, while deeply cooperating with head customers such as Sany heavy Industry and Baowu Group. it is expected that it will continue to benefit from the localization of sensors in construction machinery, metallurgy, rail transit and other fields. At the same time, the company expands the sensor network system down the industrial chain, which is expected to further open the growth space. In addition, the construction of the company's IPO investment line and R & D center will help to consolidate long-term competitiveness; abundant funds on hand, follow-up capital operation and product expansion can be expected; core executives have a high shareholding ratio, war match binds core team interests, and long-term development momentum is further condensed.

Risk factors: weapons and equipment demand is lower than expected; domestic substitution of highly reliable sensors slows down; market competition risk; technology research and development does not meet expectations; fund-raising investment project risk.

Profit forecast, valuation and rating: benefiting from the volume of aerospace weapons and equipment, the military highly reliable sensor industry is expected to usher in rapid development; under the trend of self-control, domestic high-end industrial sensors have broad room for domestic substitution. With its leading technical capabilities and long-term supporting experience in military and civilian products, the company is expected to benefit from the aerospace boom and the domestic replacement process of high-end industrial sensors. at the same time, the sensor network system is expected to continue to open up the company's growth space. We estimate that the annual return net profit of the company in 2023-24-25 will be $170 million, $229 million, respectively, and the corresponding EPS forecast is $1.92 billion, respectively, and the current share price will be $1.72 billion, corresponding to PE, respectively. Comparable companies Rong Zhi Ri Xin, Xin Zhi Sheng, Rui Chuang Wei Na 2024 Wind consistent expectation that the average PE is 38x Magi, the average PEG in 2024 is 1.00x. Combining PE and PEG method, with reference to comparable company valuation, the company is given a target PE of 38x in 2024, corresponding to the target market value of 6.5 billion yuan (corresponding to 2024 PEG about 1.11x), corresponding to the target price of 48 yuan, and a "buy" rating for the first time.