3Q23 performance meets market expectations

The company announced results for the first three quarters of 2023: revenue 170 million yuan, year-on-year + 14.30%; return to the mother net profit 40 million yuan, year-on-year-44.07%; deduction of non-net profit 37 million yuan, year-on-year-43.60%. The company's performance is in line with market expectations. In a single quarter, 3Q23's revenue was 59 million yuan, year-on-year + 33.75%, month-on-month-14.81%; net profit was 6 million yuan,-69.50% year-on-year, and-75.62% month-on-month.

Trend of development

The scale of revenue has expanded steadily and the gross profit margin has been maintained at a high level. 1) during the reporting period, the company continued to strengthen the expansion of products and customers, and the overall sales scale expanded compared with the same period last year, driving revenue growth at a higher rate.

2) in the first three quarters of 2023, the company's gross profit margin / net profit margin were year-on-year-1.03ppt/-24.45ppt to 89.69% and 23.43% respectively, and the overall gross profit margin remained high. We believe that the slight decline in gross profit margin or the increase in the proportion of revenue of microsystems and modules with low gross profit margin is mainly due to the substantial increase in R & D expenses.

We will continue to increase scientific and technological innovation, and the forward-looking indicators will expand steadily. 1) in the first three quarters of 2023, the company's expense rate was from + 19.06ppt to 56.20%, mainly due to the R & D expense rate from + 22.13ppt to 52.07%. The company's R & D expenses increased by 98.79% year-on-year in the first three quarters of 2023 compared with the same period last year, and the single-quarter R & D expenses of the company increased by 143.18% to 37 million yuan. During the reporting period, the company increased its R & D investment, expanded its R & D team, and continued to increase its investment in the fields of staff compensation, R & D materials and film production. We believe that it will help to maintain the leading edge of product technology and strengthen the company's technical barriers in the field of radio frequency and microwave.

2) compared with the beginning of 2023, the final inventory and contract liabilities of 3Q23 increased by 50.9% by 31.5% to RMB 108 million, respectively. The forward-looking indicators are expanding rapidly, reflecting that the company's current product demand is still strong, and the pace of stock preparation and production is tight.

Deep ploughing of special RF analog chips is expected to benefit from the improvement of new equipment installation, informationization and localization. The company ploughs deeply into the field of RF analog chips, focusing on the technical frontiers of various sub-fields, and is one of the few domestic enterprises that can provide special RF analog chip solutions. the products are widely used in satellite Internet, data link, communication terminal, phased array and other information equipment. The company announced in July 2023 that it was selected into the fifth batch of special new "Little Giant" enterprises of the Ministry of Industry and Information Technology. We believe that, with the in-depth development of information and intelligence of special equipment, as well as the improvement of the localization of core devices, the company, as a leading supplier of RF analog chips in the industry, is expected to benefit from the installation of new equipment in the above areas.

Profit forecast and valuation

Taking into account the pace of downstream demand release, we downgraded the company's 2023 Universe net profit forecast for 2024 by 17.3% to 1.12 pm, with the current share price corresponding to 46.8x Pmax E in 2024. We are optimistic about the company's long-term growth certainty and technological leadership, keep the target price unchanged at 64.67 yuan, and maintain an industry rating that outperforms the industry, corresponding to 60.1x Phand E in 2024, with a potential increase of 28.5%.

Risk

1) macro environment and policy risk; 2) lower-than-expected risk of order and delivery.