The company released the 2023 three-quarter report: in the first three quarters, the company achieved revenue of 349 million yuan, up 30.76% year on year, mainly due to increased sales volume of high-end products, increase in average sales price, and increase in sales volume of RF microwave products; net profit of 119 million yuan after deducting net profit of 119 million yuan, up 29.63% year on year; basic earnings per share of 0.75 yuan/share, up 19.05% year on year; weighted average return on net assets was 7.83%, up 0.86pct year on year. 2023Q3 achieved revenue of 115 million yuan, a year-on-year increase of 10.91%, a year-on-month decrease of 13.69%; net profit of 36 million yuan, a decrease of 19.06% year-on-year, a decrease of 25.08%; net profit after deduction of 33 million yuan, a decrease of 17.68% over the previous year and a decrease of 35.66% over the previous year.

Demand in overseas markets has steadily rebounded, and the high-end strategy has achieved remarkable results. 1) The growth rate of the domestic market has slowed.

2023H1 Domestic market revenue grew 93.30% year on year, compared to 48.37% in the first three quarters. The growth rate has slowed; 2) Demand growth in overseas markets has steadily rebounded. 2023H1 overseas market revenue grew 21.00% year on year, compared to 21.29% in the first three quarters, up from the growth rate in the first half of the year; 3) The high-end development strategy continued to advance. In the first three quarters of 2023, the revenue of high-end products increased 59.81% year on year, and the revenue share increased to 20.98%, an increase of 3.53pct year on year, driving the average unit price of the four categories of products to increase 26.87% year on year, and the higher the price of the product, the faster the sales growth.

Radio frequency microwave products are growing rapidly. The market space for RF microwave products is large, the growth rate is fast, and the gross margin is high. The company's perfect product matrix has led to the company's overall rapid growth. In the first three quarters of 2023, domestic RF microwave product revenue increased 76.36% year on year, continuing to maintain a high growth trend.

Gross margin continues to rise, and factors such as continued increases in R&D investment, interest expenses, and other revenue reductions affect net profit margins. In the first three quarters of 2023, the company's gross profit margin was 61.62%, up 4.02pct year on year; net profit margin was 34.06%, down 3.56pct year on year. The 2023Q3 gross margin was 62.98%, up 3.29 pct year on year and 0.64 pct month on month; net profit margin was 31.10%, down 11.51 pct year on year, down 4.73 pct month on month. In the first three quarters of 2023, the company's period expenses were 91 million yuan, an increase of 82.26% over the previous year, and the period rate was 26.16%, an increase of 7.39 pct over the previous year.

Among them, sales expenses were 54 million yuan, up 37.59% year on year; sales rate was 15.44%, up 0.77 pct year on year; management expenses were 115 million yuan, up 51.59% year on year; management fee rate was 4.30%, up 0.59 pct year on year; financial expenses - 032 million yuan, up 0.1 billion yuan year on year; interest income for the first three quarters of 2023 decreased by 2,321,600 yuan year on year, reducing the rate of profit growth. Excluding the influence of the parent company's interest income, net profit after deducting non-retroactive income in the first three quarters of 2023 increased 45.17% year on year; R&D expenses were 54 million yuan, up 58.74% year on year, R&D expenses were 15.59%, and R&D expenses were 15.59%, up 2.75pct year on year, mainly due to increased R&D personnel, increased share payments, and increased material consumption and test design costs for R&D projects. The increase in R&D expenses laid a solid foundation for the company's future development. Other 2023Q3 revenue was 5.8 million yuan, a year-on-year decrease of 3.92 million yuan.

We adjusted our profit forecast based on the latest financial report. We expect the company to achieve net profit of 1.70/223/294 million yuan in 2023-2025, corresponding to PE 36.5/27.8/21.1 times (2023.11.03), maintaining the “increased holdings” rating.

Risk warning: New product development falls short of expectations; market development falls short of expectations; risk of intellectual property disputes.