Core views

The company released its report for the third quarter of 2023. 2023Q3 achieved operating income of 798.204 million yuan (+23.25%), net profit of 31.9291 million yuan (+29.42%), net income of 167 million yuan (+34.71%) in the first three quarters, and net profit of 53.3683 million yuan (+45.24%). The increase in the company's high-end product shipments has led to an increase in gross margin, and the increase in R&D investment has led to a continuous increase in the overall competitiveness of the company's various product lines. Existing products are constantly being upgraded and iterated, application scenarios are constantly being enriched, new products are being introduced smoothly, orders are growing rapidly, the core product matrix is gradually being improved, and market share is steadily increasing. The company is expected to fully benefit from the development of the radio industry.

occurrences

The company released its report for the third quarter of 2023. In 2023Q3, the company achieved operating income of 798.244 million yuan, a year-on-year increase of 23.25%, net profit of 31.9291,000 yuan, a year-on-year increase of 29.42%, revenue of 167 million yuan, a year-on-year increase of 34.71%, and net profit of 53.3683 million yuan, a year-on-year increase of 45.24%.

Brief review

Q3 Revenue and profit grew steadily, and R&D investment remained high

Judging from the profit statement, 2023Q3's revenue and profit increased steadily, and gross margin increased significantly from year to month. In 2023Q3, the company achieved operating income of 79.820,400 yuan (+23.25%), net profit of 31.9291 million yuan (+29.42%), net income of 167 million yuan (+34.71%) in the first three quarters, and net profit of 53.3683 million yuan (+45.24%).

The increase in revenue is mainly due to the continuous enrichment of application scenarios for the company's core products, the steady increase in market share, and the gradual introduction of new products. The company focuses on high-end test simulation instruments. Shipments of high-performance wireless channel simulators continue to grow, driving a significant increase in gross margin. 2023Q3's gross margin was 68.59%, an increase of 4.70 pcts over the previous year, an increase of 4.67 pcts over the previous year, driving the gross margin in the first three quarters to 66.75% (+1.37pcts).

The increase in the R&D expense ratio led to an increase in the cost ratio during the period, but the increase in gross margin combined with the increase in other income and the reduction in income tax caused the net interest rate not to fall but to rise.

The company's R&D expenditure rate for the first three quarters of 2023 was 25.23% (+4.66pcts), driving the period's cost rate to increase to 34.42% (+5.50pcts). The increase in R&D investment led to a continuous increase in the overall competitiveness of the company's various product lines. The company's other earnings increased 642.09% year on year, and income tax fell 53.02% year on year, so the net interest rate did not fall but rose, reaching 32.01% (+2.32pcts).

Judging from the balance sheet, a large number of projects under construction have been strengthened, which may indicate that fund-raising projects are progressing smoothly. As of September 30, 2023, the number of projects under construction of the company was 0 million yuan, a decrease of 67 million yuan from June 30, 2023, and fixed assets of 106 million yuan, an increase of 70 million yuan from June 30, 2023. The radio test simulation equipment production base project, radio test simulation technology research and development center project, and radio test simulation open laboratory project raised by the company continues to be built. A large number of improvements to the projects under construction may indicate that the project is progressing smoothly, and it is expected that the company's R&D and production capacity will be enhanced after completion.

Judging from the cash flow statement, the net cash flow from operating activities improved significantly over the same period last year. The net cash flow from operating activities of the 2023Q3 company was 1,204443 million yuan, which changed from negative to positive, an increase of 3.4843 million yuan over the previous year. The net cash flow from operating activities in the first three quarters was -6.3219 million yuan, an increase of 32.8835 million yuan over the previous year, and the cash flow from operating activities improved markedly.

The product matrix is gradually being improved, and the application field continues to expand

The company's existing products are constantly being upgraded and iterated, application scenarios are constantly being enriched, new products are being introduced smoothly, orders are growing rapidly, the core product matrix is gradually being improved, and its market share is steadily increasing. Sales of core products, such as wireless channel simulators and RF microwave signal generators, continued to rise steadily. Not only were they widely recognized by traditional R&D customers, but they also continued to sink into production and quality inspection systems.

Wireless channel simulator: The company's leading product, application scenarios continue to be rich, market space is growing steadily, and the comprehensive performance and functions of the company's products continue to iterate, gradually forming important breakthroughs in markets such as satellite communications and semiconductors; as the complexity of R&D requirements in various downstream fields continues to increase, the company's high-performance model product shipments continue to grow.

RF microwave signal generator: RF microwave signal generator products have further matured and continued to gain recognition from downstream users. Order volume is growing rapidly, contributing significantly to the company's performance. The company continues to optimize product performance, comprehensive technical indicators are gradually approaching global industry benchmark products, and has carried out research on signal generation technology with higher bandwidth and higher frequency.

Spectrum/vector signal analyzer: In January 2023, the company officially released the KSW-VSA01 spectrum/vector signal analyzer, which can be applied to R&D and production tests in the fields of wireless communication, satellite monitoring, and aviation. It is gradually being tested and tested by various downstream users, and certain orders have been formed.

The company's product matrix has been further improved, bringing new growth points to the continuous growth of business performance.

The company gradually formed system-level solutions and gradually expanded application areas. With the continuous enrichment of the company's product matrix and the accumulation of industry applications, the advantages of the company's system-level solutions are becoming more and more obvious. They have continued to expand from radio testing and simulation to solutions such as simulation training and digital twins for electromagnetic environments, which can better meet the testing and simulation needs of overall units in various industries and customers in various field application scenarios. Solutions surrounding complex electromagnetic environments continue to be promoted in depth in the industrial sector. System-level test systems continue to penetrate commercial communications, defense and aerospace fields, and brand awareness of the company and products continues to rise.

Profit forecast and investment advice: The company is a scarce target for high-end radio test simulation instruments. Product expansion and application expansion two-wheel drive, maintaining a “buy” rating

The company is a scarce target for high-end radio test simulation instruments in China. The development of radio technology has driven a rapid increase in demand for high-end test simulation instruments. The company's existing products are constantly being upgraded and iterated, application scenarios are constantly being enriched, new products are being introduced smoothly, orders are growing rapidly, the core product matrix is gradually improving, and market share is steadily increasing. We expect the company's net profit from 2023 to 2025 to be 115 million yuan, 160 million yuan, and 221 million yuan respectively, with year-on-year growth rates of 41.62%, 39.14%, and 37.86% respectively. The corresponding EPS from 2023 to 2025 is 1.37, 1.91, and 2.63 yuan, respectively, corresponding to the current stock price PE, which is 44, 31, and 23 times, respectively, maintaining the “buy” rating.

Risk analysis

1. Import risk of key core devices: Some of the key core components of the company's equipment mainly come from imports. Although the company has prepared key core devices such as chips in advance, it is still possible that the company is unable to purchase these key core devices in a timely manner as needed due to factors such as trade embargoes and regulations in exporting countries, which has an adverse impact on the company's production and operation.

2. Fund-raising projects fall short of anticipated risks: The company invests in radio testing and simulation equipment production bases, simulation technology research and development centers, and simulation open laboratory projects. If the project construction progress falls short of expectations, it will adversely affect the company's future performance growth.

3. Risk of raw material price fluctuations: The company's raw materials mainly include electronic components, outsourced finished parts, PCBs, chassis and structural parts, etc., and procurement prices fluctuate greatly due to factors such as national industrial policy, market supply and demand, etc. If the price of raw materials rises in the future, and the company is unable to rationally arrange procurement, control the cost of raw materials, or adjust product prices in a timely manner, it will adversely affect the company's profitability.