Event

On October 24, Xinluineng released its third quarterly report for 2023. 2023Q1-Q3, the company achieved revenue of 1.094 billion yuan, down 18% from the same period last year, and realized a net profit of 158 million yuan, down 45% from the same period last year.

Comment

1, the impact of demand rhythm, the company's performance under pressure. Since 2023Q2, the company's revenue has declined due to the pace of demand. 2023Q1-Q3, the company's revenue in a single quarter was 497 million yuan, 390 million yuan and 206 million yuan respectively. In terms of different areas, the income of 2023Q1 and 2023Q2 in special areas is about 320 million yuan and 260 million yuan, and that in communications and network areas is about 180 million yuan and 130 million yuan. In the single quarter of 2023Q3, the company's revenue was 206 million yuan, down 54% from the same period last year and 47% from the previous year. The net profit returned to its mother was-32 million yuan, a decrease of 133 million yuan from the same period last year and 109 million yuan from the previous year.

2. Affected by the decline in the scale of income, the company's gross profit margin and net profit margin have decreased. 2023Q1-Q3, the company's sales gross profit margin was 48.38%, which was 1.38% lower than the same period last year. 2023Q3, and the company's sales gross profit margin was 41.12%, lower 10.48pcts than the same period last year. 2023Q1-Q3, the company's sales, management, finance and R & D expense rates are 4.26%, 7.10%, 0.56% and 21.70% respectively, increasing 0.69pcts, 2.07pcts, 0.71pcts and 7.76pcts, respectively, and raising four fee rates by 9.81pcts to 33.63%. As a result of lower gross profit margin and higher expense rate, 2023Q1-Q3, the company's net sales margin decreased by 8.00pcts to 13.94% compared with the same period last year.

3. The investment in R & D continues to increase, and the accumulation of technology lays the foundation for the company's long-term development.

2023Q1-Q3, the company's R & D expenditure was 237 million yuan, an increase of 27% over the same period last year. 2023Q3 spent 86 million yuan on research and development in the single quarter, an increase of 18% over the same period last year and 5% month-on-month growth. In the special field, the company speeds up the research and development of domestic products and continues to carry out the research and development of highly reliable domestic models; in the field of communications and server power supply, the company carries out the research and development of multi-category and multi-series power supply products, technology accumulation lays the foundation for the company's long-term development.

4. The production capacity is well prepared, and the industrial layout is further improved. At the end of 2023Q3, the company was under construction of 165 million yuan, an increase of 171% over the same period last year, mainly due to increased expenditure on factory construction in the west district of Leineng, Beijing. In January 2023, the company announced that it planned to build a motor drive and power R & D and manufacturing base project in Xi'an, with a total investment of about 170 million yuan; in June, the company announced that it planned to build a communications and data center power R & D and manufacturing base project with subsidiary Shenzhen Leineng as the main body, with an investment of about 290 million yuan. On October 24, the company announced that it intends to register and set up a project company in Chengdu High-tech Zone, and take it as the main body to invest in the power semiconductor R & D and settlement headquarters project, with an investment of about 500 million yuan. With the gradual production of the company's investment projects, Xi'an, Shenzhen and Chengdu projects have been completed one after another, the company's production capacity will be further expanded, and the industrial layout will be further improved.

5. The company intends to buy back shares for equity incentive, reflecting long-term development confidence. On October 24, the company announced that it had received a proposal from the chairman to buy back the company's shares. Mr. Wang Bin, chairman of the board, suggested that the company should buy back some of the company's shares through centralized bidding transactions, with a total capital of 3000-60 million yuan, and use the repurchased shares in the company's employee stock ownership plan or equity incentive, so as to further improve the company's incentive mechanism. enhance team cohesion and enterprise competitiveness, reflect the company's long-term development confidence.

6. Profit forecast and investment rating: considering the impact of the pace of industry demand, we downgrade the company's profit forecast. It is estimated that the company's net profit from 2023 to 2025 will be 2.91,4.12 and 509 million yuan respectively, and the corresponding share price PE will be 29,21 and 17 times respectively, maintaining the "buy" rating.

Risk hint

The market demand is lower than expected; the price reduction of military products exceeds market expectations; and the production capacity construction of fund-raising projects is not as expected.