Incidents: On October 27, the company released its report for the third quarter of 2023. Q1-Q3 in '23, it achieved revenue of 170 million yuan, a year-on-year increase of 14.30%; net profit of 40 million yuan, a year-on-year decrease of 44.07%; and realized net profit deducted from the mother of 37 million yuan, a year-on-year decrease of 43.6%. The third quarter achieved revenue of 59 million yuan, up 33.75% from the previous year; realized net profit of 0.06 billion yuan, a year-on-year decrease of 69.5%; and realized net profit after deducting non-return mother's net profit of 0.07 billion yuan, a year-on-year decrease of 62.52%.

Strengthen product and customer development, and achieve growth in sales scale and revenue: 23Q3 achieved revenue of 59 million yuan in a single quarter, an increase of 33.75% over the previous year, mainly due to the company's active strengthening of product and customer development, which further increased operating income. The company gives full play to the advantages of private enterprises and is deeply tied to customers. According to the semi-annual report, the company's R&D expenses for the first half of the year increased 75% year on year, and it was mentioned in the company's institutional research notes that the company's RF transceiver chips, high-speed and high-precision ADC/DAC chips, power management chips, microsystems and modules all have key self-developed technologies leading the industry. At the same time, it has actively expanded its product matrix. It has developed more than 50 systems and module products, of which more than 10 are already in the mass production or certification stage; the products developed by the company for low-orbit commercial satellites have been substantially applied in some projects. In the field of high-speed and high-precision AD/DA, the company's iteratively developed fixed product, the CX9261A, extends the frequency range to 30MHz-7GHz and the maximum bandwidth to 75MHz, which can support functions such as frequency hopping and multi-chip synchronization; the second product, the CX7442A, increased the analog input bandwidth to 1.5GHZ, reduced power consumption to 0.42 watts/channel, and added functions such as TDC, FD, FIR, and EQ. Both products received a small number of orders this year, which contributed to the increase in the company's revenue.

Maintain a high level of R&D investment and maintain a favorable market position: 23Q3 net profit for the single quarter was 0.06 billion yuan, a year-on-year decrease of 69.05%, and R&D investment accounted for 62.62% of operating income, an increase of 28.18 pct over the previous year. The company continued to invest in high-intensity R&D expenses in the third quarter to maintain the advantages of technological innovation and maintain the market competitiveness of the company's products. According to the company's semi-annual report, as of June 30, 2023, the company has been granted 34 patents. In the research projects, the technical level of aerospace high-reliability precision power supply system packages, multi-channel RF direct acquisition transceiver chips and synchronous transceiver systems, broadband high-linear high-efficiency RF front-end chips, integrated phased array microsystems, and high-reliability precision micro power modules has reached the leading level of technology in the country, and the technical level of baseband RF integrated SDR microsystems and broadband high linearity RF transceiver chips has reached the international advanced level. It is expected that for some time to come, the company will be able to maintain its leading position in related fields through continuous R&D investment and technology iteration.

Investment suggestions: The company's revenue from 2023 to 2025 is estimated to be 303 million yuan, 409 million yuan, and 524 million yuan respectively, and net profit of 101 million yuan, 167 million yuan, and 244 million yuan respectively. Using the PE valuation method, the downstream market and product commonalities are comprehensively considered, and the November 1 closing prices of Xindong Lianke and Guobo Electronics were selected as a reference, giving 55 times PE in 2024, with a target price of 60.07 yuan, maintaining a “buy-A” investment rating.

Risk warning: Downstream demand falls short of anticipated risks, increased market competition risks, and product development falls short of anticipated risks.