Events: The company released its report for the third quarter of 2023. The first three quarters of 2023 achieved revenue of 263 million yuan, YoY +5.32%; net profit of 30 million yuan, YoY -52.14%; net profit of 12 million yuan, YoY -10.15%; gross profit margin of 26.77%, a year-on-year increase of 1.71 pct; the company's overall revenue growth in the first three quarters was steady, and the pressure on the profit side was mainly due to the high base of non-recurring profit and loss for the same period last year, and the sharp decline in government subsidies and the increase in current expenses during the reporting period.

Comment: Q3 performance was under pressure, and gross margin performance was impressive. In 2023Q3, the company achieved revenue of 68 million yuan, YoY -23.82% in a single quarter; realized net profit of 8.12 million yuan, YoY -75.90%. The large decline in profit was mainly due to the year-on-year decline in the company's revenue side in the third quarter, the year-on-year decrease in government subsidies received, and the increase in R&D investment and management expenses; the gross profit margin was 32.98%, up 6.62 pct year on year. On the cost side, in the 2023Q3 quarter, the company's sales expenses were 840,000 yuan, YoY +28.23%; management expenses were 10.46 million yuan, YoY +21.43%; financial expenses - 1.25 million yuan, YoY +6.48%; R&D investment was 8.74 million yuan, YoY +3.68%; R&D investment accounted for 12.79% of operating income, an increase of 3.40 pct over the same period last year. R&D companies continue to invest to continuously consolidate product technical advantages and competitive barriers.

5. The policy side and industry side of 5G continue to catalyze, and technological evolution has spawned new demand for communication devices. On October 9, the Ministry of Industry and Information Technology approved the test frequency of the new generation of railway mobile communication systems (5G-R), and the promotion of 5G-R railway applications began to accelerate; from October 10 to 11, Huawei released the world's first full range of 5G-A (5.5G) solutions at the 2023 Global Mobile Broadband Forum; on October 21, Zhang Yunming, Vice Minister of Industry and Information Technology, mentioned at the 2023 China 5G Development Conference that it is necessary to forward-looking 5G-A technology research, standard development and product development to accelerate the evolution of 5G lightweight (RedCap) technology With commercial deployment, continuous testing and verification of new 5G technologies will be carried out to accelerate the maturation of the industry. 5.5G can greatly increase the upstream and downstream rate and reduce latency through technology such as carrier aggregation and the adoption of new frequency bands. The number of 5.5G base station antennas has increased to 192 channels, and demand for radio frequency products such as filters will increase dramatically. With the gradual development of 5.5G construction, Canqin Technology's base station ceramic filter products are expected to benefit deeply.

Strong technology, excellent products, leading manufacturer of ceramic dielectric waveguide filters. The company has a number of core technologies in the fields of advanced microwave dielectric ceramic material formulation and preparation, high-performance dielectric waveguide filters, and one-time molding of complex ceramics. The production line covers the entire process from preparation of ceramic powders to finished components leaving the factory. The latest ceramic dielectric filter mass-produced by the company in 2022 is widely used in various application scenarios in the sub-6GHz band, including 4G, 5G, 5.5G and other FDD architecture communication networks.

Profit forecast and investment advice: Canqin Technology is a leading manufacturer of ceramic filters in China. It is optimistic that with its technological and product advantages, the company will benefit deeply from the explosion of demand brought about by 5.5G construction. The company is expected to achieve revenue of 372/18.15/2,285 million yuan and net profit of 0.60/4.51/529 million yuan in 2023-2025, corresponding to EPS of 0.15/1.13/1.32 yuan, covering the first time, and giving it a “buy” rating.

Risk warning: 5.5G construction progress falls short of expectations, and industry competition is intensifying.