China's leading application-specific integrated circuit, special chip and MEMS sensor design and manufacturing enterprises. The company has the capabilities of multi-spectral sensor research and development, multi-dimensional sensing and AI algorithm research and development, providing global customers with excellent MEMS chips, ASIC processor chips, infrared thermal imaging and temperature measurement industry chain products, laser, microwave products and optoelectronic systems. The products are widely used in night vision observation, artificial intelligence, machine vision, autopilot, UAV payload, intelligent industry, security and fire protection, Internet of things, medical and other fields.

The national economy continues to improve, and the company's performance has reached a new high. 2023Q1-Q3, the company achieved operating income of 2.662 billion yuan, an increase of 55.70% over the same period last year. The net profit attributed to the owner of the parent company was 387 million yuan, an increase of 112.12% over the same period last year, and the net interest rate was 13.44%. Realized deduction of non-return net profit of 344 million yuan, an increase of 115.91% over the same period last year; deduction of non-return net interest rate of 12.94%.

Gross profit margin rebounded and costs remained stable during the period. 2023 Q1-Q3 gross profit margin is 50.36%. The sales / management / R & D / financial expense rates are 5.13% 10.51% 17.35% 1.06% respectively.

Deep ploughing uncooled infrared field, adhere to the layout of the whole industry chain. The company's infrared products take sensor chip, detector, movement and whole machine as the core, covering the whole infrared industry chain. already has advanced integrated circuit design, sensor design, device closed testing, image algorithm development, system integration and other R & D and manufacturing capabilities, the company's products are mainly used in military and civilian fields. At present, only a few countries in the world, such as the United States, France, Israel, China and so on, master the design technology of uncooled infrared chips. through its own development, the company has filled a series of gaps in the research and development, production, packaging and application of high-precision chips in this field, and has become one of the few companies in China with independent R & D capability and mass production of infrared detector chips. As of 2023H1, the company's infrared imaging equipment products achieved an operating income of 1.478 billion yuan, accounting for 82.85% of the operating income, with a gross profit margin of 52.77%.

Establish a complete microwave industry chain, microwave semiconductors continue to build core competitiveness. In 2018, the company set up a wholly-owned subsidiary Chengdu Yingfei, which is involved in microwave businesses such as phased array antenna subsystem and ground surveillance radar equipment: in 2021, it acquired a 56.253% stake in Wuxi Huamei and laid out Tamp R component business. The above two steps have opened the development channel for the company's business in the microwave field, obtained valuable qualifications, condensed the technical team, and built the traction and driving force for the development and development of microwave semiconductor business. In 2022, the company set up MIIC technology and product research and development teams and silicon-based millimeter wave chip teams to continue to promote full-chain technology and product development from core chips to components and subsystems, with remarkable progress in all aspects. As of 2023H1, the company's microwave and radio frequency products achieved operating income of 244 million yuan, accounting for 13.68% of operating income, with a gross profit margin of 34.84%.

The construction of a global marketing network, overseas market expansion is smooth. With advanced infrared thermal imaging technology and product quality, the company has comprehensively developed the global outdoor sports, industrial testing and security vision market. As of 2023H1, the company's sales revenue in overseas markets has maintained a relatively rapid growth trend, achieving overseas main business income of 647 million yuan, an increase of 21.88% over the same period last year, accounting for 36.96% of the main business income in the current period.

The product delivery is smooth and the production capacity continues to increase. The company continues to increase investment in development and manufacturing platforms for products such as CMOS readout circuits, MEMS infrared sensor wafers, and infrared detectors; build wafer-level thermal imaging modules and thermal imager manufacturing platforms for different industries, further enriching uncooled infrared product lines; and continuously enhance the production capacity of MEMS R components to ensure smooth delivery of models. In the production of infrared detector chips, the 8-inch MEMS wafer production line jointly built by the company and the wafer foundry has a production capacity of 1500 wafers per month. Infrared detector manufacturing platform to accelerate the introduction of automatic equipment, metal packaging and ceramic packaging infrared detectors annual production capacity of 800000, wafer-level packaging infrared detectors annual production capacity of 2.6 million; optimized wafer-level thermal imaging module manufacturing platform, the annual production capacity reached 1.5 million; the annual production capacity of infrared thermal imaging equipment has been increased to 600000.

Civil infrared imaging technology is becoming more and more mature, and the application scene continues to increase. Due to the development of technology and the reduction of product cost and price, the application field of infrared thermal imager in civil market is expanding continuously. with the increasing application scenarios of infrared thermal imager in electric power, consumption, construction, law enforcement, fire protection, vehicle and other industries, the civil infrared thermal imaging industry will usher in a period of rapid growth of market demand. According to Maxtech International and Beijing Ericsson Consulting Center, the global civil infrared market will reach 7.465 billion US dollars in 2023. According to Yole, the global uncooled civilian infrared market is expected to reach US $4.424 billion in 2024.

With the continuous development of China's economy, the gradual reduction of the price of domestic infrared imaging products and the popularization of applications, the market demand for infrared thermal imagers will maintain a sustained and steady growth in the future. In addition to the traditional application industry, more emerging market demand will become the new growth pole of the infrared imaging market in the future.

The microwave industry has a large market space and will maintain stable growth in the future. According to the market research and forecast data of Yole, the global market for consumer radio front-end integrated circuits is more than US $20 billion per year and will maintain an average annual compound growth rate of more than 10 per cent in the coming years. The global base station-end radio front-end integrated circuits market is worth more than US $3 billion annually and will maintain an average annual compound growth rate of more than 5 per cent in the coming years. In the field of defense equipment, the steadily growing defense budget supports the growth of the radar market. In addition, the Leo satellite communication network has great potential in global communications and Internet access, 5G, the Internet of things and other application fields, the global satellite competition has begun, and the satellite market has entered a period of rapid growth. The demand for microwave semiconductors and microwave components, phased array antennas and radar is booming, and the market space is broad.

Profit forecast, valuation and rating: as a domestic leader in uncooled infrared chips, we are optimistic that infrared thermal imaging technology will further promote application landing and penetration in automotive electronics, special needs, security and other aspects in the next 5 years. At the same time, the company's microwave business layout has seen an embryonic form, with great growth potential. Considering the increase in the proportion of private product sales with relatively low gross profit margin and the increase in the proportion of Wuxi Huashan sales, the company's overall gross profit has declined, we have lowered the company's 23-24 net profit by 5.24% 7.26 (by 20.5% 11.4% respectively), and the new 2025 homing net profit is forecast to be 921 million yuan, corresponding to 37X/27X/21X, respectively, benefiting from the continuous improvement of infrared thermal imaging technology. Still maintain a "buy" rating.

Risk hint: the market demand for infrared imaging technology is declining; new business is not as expected.