Event: The company released its three-quarter report for the year 2013. The first three quarters of 2023 achieved revenue of 1,076 billion yuan, a year-on-year increase of 16.74%, and net profit of 0.5 billion yuan, a year-on-year increase of 103.18%.

Key points of investment

Sales volume increased, net profit increased by 103.18% in the first three quarters of 2023: the first three quarters of 2023 achieved revenue of 1,076 billion yuan, an increase of 16.74% over the previous year. 2023Q3 achieved revenue of 368 million yuan, a year-on-year growth rate of 24.40%, mainly due to an increase in cash received from the sale of goods and the provision of labor services. Net profit of 0.5 billion yuan was realized in the first three quarters of 2023, an increase of 103.18% over the previous year. Net profit for 2023Q3 was -0.02 billion yuan, up 96.91% year on year. The increase was significant due to the small base of net profit attributable to shareholders of listed companies and net profit attributable to shareholders of listed companies for the same period last year after deducting non-recurring profit and loss. The company's gross profit margin for the first three quarters of 2023 was 28.54%, a year-on-year increase of 4.47pct. Receivables raised $37.262 billion, an increase of 77.21% over the previous year.

The fixed increase was approved, and 150 million yuan will be invested in the Microelectronics Research Institute construction project: the company's fixed increase project was approved by the Securities Regulatory Commission in October of this year. The total amount of capital raised by issuing shares to specific targets is about 690 million yuan. The net capital raised is intended to be used for the Microelectronics Research Institute construction project, supplementary working capital, and bank loan repayment. The Microelectronics Research Institute's construction project plans to invest 150 million yuan. After completion, the project will provide a good R&D platform for research and development of new technologies such as SIP, MMIC, and MMCM. It can give full play to the enthusiasm and creativity of the company's technical personnel, continuously develop new technologies and products, increase the technical content and added value of products, and enhance the core competitiveness of the enterprise, which is an inevitable requirement for achieving the company's medium- to long-term development strategy.

Benefiting from the increase in national defense and military spending, downstream demand is strong: the company is committed to the R&D, design and manufacture of high-performance microwave electronics, marine equipment and products, covering the three major fields of aerospace communications, aeronautical radar, and seafaring ships. The main military industry products are military semiconductor components, microwave circuits and components. As supporting components for radar, precise guidance, space communication, and electronic warfare, their products have long been used in various types of space equipment and airborne, shipborne, and missile-borne weapon platforms. The company is engaged in R&D, design, construction and sales of intelligent high-performance boats, and is an intelligent high-performance boat system solution provider. For many years in a row, the company ranked first among domestic enterprises in composite boat production and sales volume. The company will benefit from the continued rise in defense and military budget spending, and the military informatization market will continue to expand, driving rapid growth in demand for military electronics.

Profit forecast and investment rating: The company's performance is in line with expectations. Based on the broad prospects of downstream applications and the company's leading position in the military electronics field, we maintain our previous forecast. The net profit for 2023-2025 is 0.15/0.68/85 billion yuan, respectively, and the corresponding PE is 592/135/107 times, maintaining the “increase in holdings” rating.

Risk warning: 1) Fund-raising project construction falls short of expectations; 2) Raw material prices fluctuate.