Events: The company released its report for the third quarter of 2023. The first three quarters of 2023 achieved revenue of 4,035 billion yuan, +8.79%; realized net profit of 359 million yuan, -9.30% year-on-year; and realized net profit after deduction of 281 million yuan, -7.59% year-on-year.
Performance is under phased pressure, and profitability has declined
2023Q3 achieved revenue of 1.158 billion yuan in a single quarter, -5.43% year-on-year; realized net profit of 472.196 million yuan, or -54.53% year-on-year; and realized net profit of 29.0763 million yuan after deduction, or -58.53% year-on-year.
The reason for the decline in the company's net profit can be attributed to the year-on-year increase in R&D investment in new fields such as Beidou navigation, satellite communications, and unmanned systems, and other period expenses, as well as the slowdown in the pace of contract delivery of some products.
In terms of gross margin expense ratio, the company's gross margin of sales in the first three quarters reached 33.75%, -1.66pct; among them, the gross profit margin for the Q3 single quarter was 33.20%, +2.19pct year-on-year, and -1.85pct month-on-month. The company's sales expense ratio for the first three quarters was 25.02%, the same as the same period last year. Sales/management/R&D/finance expenses increased by 0.12/0.33/-0.43/-0.01pct, respectively.
The fixed increase in capital will be invested in the Beidou+satellite+unmanned business, and the capital strength can be increased. The company will raise 1.86 billion yuan in capital, which will be invested in the “Beidou+5G” integrated R&D industrialization project, satellite Internet research and development and Tianshu R&D center construction project, and the Tianteng unmanned information industry base project.
Guangzhou Radio Group, the controlling shareholder of the company, and Pingyun Industrial Investment, a wholly-owned subsidiary of the company, subscribed 26.02% of the total number of shares issued by the company (maintaining the ratio of shares held in listed companies before and after issuance). In addition, investors such as China Investment Capital, a wholly-owned subsidiary of China Mobile, the Beidou Seven Star Equity Investment Fund under the Ordnance Group, Guohua Satellite Application Industry Fund under Aerospace Science and Technology, Poly Defense Equity Investment under Poly Group, and Guangzhou's state-owned Guangzhou Industrial Investment are eligible for this offering.
China Mobile Investment Corporation has strategically invested in the Beidou sector, and Haig Communications is in a leading position in the industry in the fields of Beidou navigation and wireless communication. The strategic investment in Haeger Communications is a key step for China Mobile to speed up the “5G+ Beidou” problem and lay out the integration of space, earth, and satellite Internet. Group business departments and professional companies such as China Mobile's Shanghai Industrial Research Institute and Haeger Communications have carried out business cooperation in various fields such as high-precision positioning, in-vehicle terminals, timing servers, and single Beidou terminals to actively promote collaboration between production and investment.
Investment suggestion: Due to the slowdown in contract delivery for some products, the third quarter results were under pressure. We lowered net profit for 23-25 from 797/9.41/1,093 million yuan to 6.76/808/981 million yuan. The corresponding PE was 39/33/27 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: The execution of the contract is slower than expected, the development of Beidou applications is slower than expected, the risk of technology research and development, the risk of market competition exceeding expectations, and there is uncertainty about the content of cooperation and implementation progress.