3Q23 performance is in line with our expectations
The company announced its results for the first three quarters of 2023: revenue 2.662 billion yuan, year-on-year + 55.70%; return to the mother net profit 387 million yuan, year-on-year + 112.12%; deduction of non-net profit 344 million yuan, year-on-year + 115.91%, the company's performance is in line with our expectations. In a single quarter, 3Q23's revenue was 878 million yuan, year-on-year + 40.94%, month-on-month-11.67%; net profit returned to its mother was 129 million yuan, + 84.91% year-on-year and-26.53%.
Trend of development
The trend of high performance growth continues, and profitability continues to improve. 1) in the first three quarters of 2023, the chain scene of the domestic infrared guidance industry rebounded, and the downstream demand for special equipment continued to release. The company's revenue and net profit in the first three quarters of 2023 were + 56% / + 112% respectively compared with the same period last year, and the high growth trend of batch production and smooth delivery of new and old projects continued. 2) in the first three quarters of 2023, the company's gross profit margin and net profit margin were + 3.28ppt/+2.83ppt to 50.36% and 13.44% respectively compared with the same period last year, and its profitability continued to improve. We believe that it is mainly due to the rapid growth of high gross margin special business and the appearance of scale effect.
During this period, the cost control is good, and the R & D investment remains high intensity. 1) during the first three quarters of 2023, the company's expense rate was from-1.29ppt to 34.05%, of which the management / R & D expense rate was respectively year-on-year and-0.58ppt/-4.23ppt. During the period, the expense rate was well controlled, which we think is mainly due to the scale effect brought about by the rapid expansion of revenue scale. 2) in the first three quarters of 2023, the company's R & D expenses increased by 25.6% to 462 million yuan compared with the same period last year. According to the company's semi-annual report in 2023, as of June 30, 2023, the company had 15 projects under research, with a cumulative R & D investment of 929 million yuan. R & D investment remains high; 3) the net cash flow of the company's operating activities in the first three quarters of 2023 is + 12.6% to 145 million yuan compared with the same period last year, and the cash flow is good in the first three quarters. 4) the company's 3Q23 inventory increased by 11.7% to 1.672 billion yuan compared with the end of 2022, suggesting that the pace of stock and production is still tight.
Continue to expand the business layout, multi-line simultaneously to create a full-spectrum leader. The company is based on the infrared main business, actively expand the business layout of new areas, 1H23 won the bid for BYD far infrared module project, and invested in the establishment of Ruichuang Photon Technology Co., Ltd. and Ruisi Microelectronics Co., Ltd., in infrared, visual products, microwave, laser and other product fields have a number of R & D achievements. We believe that the construction of convertible bond issuance and investment projects is expected to consolidate the company's industrial capacity foundation, and the company is expected to rely on its own infrared imaging advantages to create a full-spectrum leader and further open its own growth space.
Profit forecast and valuation
We keep the company's earnings forecast unchanged, and the company's current share price corresponds to a price-to-earnings ratio of 40.1 to 28.8 times 2024. Considering the long-term growth space and the certainty of special business growth under the multi-domain layout of the company, we maintain the outperform industry rating and maintain the target price of 59.26 yuan, corresponding to the price-to-earnings ratio of 54.2 pounds in 2023 and 2024, with a potential increase of 35%.
Risk
1) the new order in the special field is not as expected; 2) the product delivery is not as expected.