incident. On October 31, 2023, the company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 709 million yuan, a year-on-year increase of 21.71%; realized net profit of 44 million yuan, a year-on-year decrease of 79.91%; and realized net profit after deduction of net profit of 48 million yuan, a year-on-year decrease of 31.33%.

Q3 Revenue and profit achieved double growth, focusing on layout and building an overall cloud management solution. 2023Q3 achieved revenue of 289 million yuan in a single quarter, up 25.31% year on year; realized net profit of 814,600 yuan, up 108.68% year on year; and realized net profit after deduction of 242,800 yuan, up 101.70% year on year, mainly due to increased gross profit and increased foreign investment income, while accelerated inventory consumption led to reduced preparations for falling prices. The company is a pioneer in wireless communication modules in the field of smart grids. In 2009, the wireless communication module developed independently was applied to centralized remote meter reading in the national grid, achieving localized replacement. According to company data, in recent years, the company's wireless communication module shipments for smart grids accounted for more than 50% of the national grid procurement bidding and procurement volume, and is in a leading position in this segment. At the same time, along with the rapid development trend of overseas smart grids, the company is actively expanding overseas electricity markets in Asia, the Middle East, Europe and other regions, leading the electricity market share in Saudi Arabia, India and other countries. In addition, the company focuses on the layout and construction of overall cloud management solutions to meet the needs of different customers through different product combinations. The company provides 4G intelligent OBD products for the European and American high-end Internet of Vehicles markets. The products are used in various models of well-known overseas automobile manufacturers such as Audi, Nissan, Fiat, and Volkswagen.

Strategic cooperation integrates storage technology and continues to promote the development of a series of storage products. In the first three quarters of 2023, the company incurred R&D expenses of RMB 61.1426 million, an increase of 15.75% over the previous year. R&D expenses accounted for 8.63% of operating income, and R&D investment continued to increase. In the first half of 2023, the company carried out various R&D projects such as 5G wireless communication modules and solutions, V2X wireless communication modules and solutions, 4G and NB wireless communication modules, etc., and launched products such as Cat.4 public-specialized integrated modules, Cat.1 hardware security modules, and Wifi Halow modules, laying a solid product and technical foundation for the expansion of applications such as smart energy, vehicle networking, and financial payments. The company and partners continue to promote the development of a series of products such as localized, autonomous and controllable ARM high-density storage servers, array AI servers, distributed storage software, and video AI algorithms to keep up with market demand. On October 19, the company won the bid for China Telecom's “2023 Centralized Procurement Project for Computing Services” section 2 for intelligent computing power services, which will provide intelligent computing power services for the A800 and H800. Through strategic cooperation, the company plans to establish organized storage. By integrating storage technology, disaster recovery and backup technology, integrated takeover and verification technology, and data migration, etc., the company realizes functions such as safe and reliable data center basic storage, disaster recovery and data migration, etc., thereby promoting the implementation of related businesses and further expanding the company's business scale.

Profit forecast and investment rating: We expect the company's net profit from 2023-2025 to be 0.07/3.01/495 million yuan, EPS for 2023-2025 to be 0.07/3.27/5.38 yuan, respectively, and the PE corresponding to the current stock price is 644/14/9 times, respectively. With the layout of the company's overall cloud management solution and continuous increase in R&D investment to promote the implementation of a series of storage products, we are optimistic about the company's future performance development, cover it for the first time, and give it a “buy” rating.

Risk warning: risk of macroeconomic fluctuations; risk of rising raw material prices; risk of new product technology development; risk of falling inventory prices.