In the first three quarters of 2023, the company achieved revenue of 274 million yuan, +17.74% year-on-year; realized net profit of 112 million yuan, +16.75% of the previous year; and achieved net profit of minus 0.03 billion yuan, +42.28% year-on-year. In 2023Q3, the company achieved revenue of 40 million yuan, -61.53% year-on-year; realized net profit from net income of 20 million yuan; and realized net profit from non-return net profit of 20 million yuan. The company is based on independent innovation and has a relatively complete and comprehensive technical system. After Mengsheng Science Park was put into use, R&D and production capacity was improved. Considering the company's deep technical accumulation in the field of high dynamic anti-interference, security, communication, and guidance, and has a number of core technologies, its market position is stable, and the company's “buy” rating is maintained.

The industry environment was unfavorable, and there were few product deliveries, and 23Q3 revenue fell 62%. Or due to the industry environment, the company delivered fewer products in the third quarter. 2023Q3 achieved operating income of 40 million yuan, -61.53% over the same period last year; realized net profit of 20 million yuan; achieved net profit of 20 million yuan; and achieved net profit deducted from non-net profit of 20 million yuan. Affected by this, the first three quarters of 2023 achieved revenue of 274 million yuan, +17.74% year-on-year; realized net profit of 12 million yuan, +16.75% of the previous year; and realized net profit from non-return of net profit of 0.03 billion yuan, +42.28% year-on-year. Operating costs for the first three quarters of 2023 were +21.14% yoy to 132 million yuan, with a comprehensive impact on gross margin -1.35pcts to 51.98% yoy. On the cost side, sales expenses for the first three quarters of 2023 were +3.42% to 2,0281,000 yuan; management expenses were +19.84% to 72.7626 million yuan; financial expenses changed from negative to positive to 4,05515 million yuan; R&D expenses were +0.34% yoy to 555.839 million yuan; or due to faster revenue growth, the cost rate for the first three quarters of 2023 was still -2.35pcts to 55.54% year on year. The company's credit impairment losses for the first three quarters of 2023 were 3,7487 million yuan, compared to -3.16,600 yuan in the same period last year. Combining the above factors, the company's net interest rate for the first three quarters of 2023 was +0.45pct to 4.46% year on year, and profitability increased.

The surge in inventories is yet to be unleashed, and production and stocking may continue to expand or reach an inflection point. Or affected by the pace of inventory product delivery, the company's inventory for the first three quarters of 2023 was +32.96% compared to the beginning of the period to 352 million yuan. Affected by the conversion of the Tianfu New Area Science Park to fixed assets, the company's fixed assets in the first three quarters of 2023 were +22.86% compared to the beginning of the period to 629 million yuan, and the projects under construction were -14.93% compared to the beginning of the period to 234 million yuan. We judge that its R&D and production capacity will be increased. The company's accounts receivable for the first three quarters of 2023 were +25.27% compared to the beginning of the period to 685 million yuan, and notes receivable were -49.56% from the beginning of the period to 55 million yuan, recovering the company's credit impairment losses to 3.7487 million yuan. The company's net operating cash flow for the first three quarters of 2023 was -119 million yuan, compared to -139 million yuan for the same period last year. Operating cash flow has improved; considering the quality and stability of the company's downstream customers, the cash flow situation is expected to continue to improve as subsequent customer repayments increase.

Weitong's market is developing rapidly, and the company's self-developed technology is not being developed. Advances in infrastructure, such as satellite manufacturing and launch, have reduced the cost of satellite communication, and led to a significant increase in demand for satellite terminal equipment. In particular, the emergence of low-orbit satellites has provided terrestrial communication services with lower communication delays, higher bandwidth, and wider coverage.

The Chinese Government has also clearly introduced a number of policies to strengthen satellite communications to ensure the provision of global information network services for land, sea, air and space. Although compared to foreign brands, China's satellite communications market is still in its infancy, but with years of technology investment and research and development, the company's related products have also gradually gained market recognition. With self-developed technology, the company has successfully developed dynamic communication products covering many mainstream communication bands on airborne, shipborne, and vehicle platforms, etc., and is one of the manufacturers with the most complete product serialization in the industry. The core components of the company's products are all independently designed and produced, have high integration and high reliability, have been certified by many well-known customers, and have entered the mass production stage.

The listing of 300 million yuan convertible bonds is used for the development of electronic countervailing equipment, etc. On October 17, 2023, the company listed 300 million yuan convertible bonds. After excluding issuance fees, the company actually raised 295 million yuan, of which 250 million yuan is intended to be used for electronic countermeasure equipment research and production center construction projects, and 50 million yuan to supplement working capital. The electronic warfare equipment research and production center construction project is implemented by Mengsheng Technology, a wholly-owned subsidiary of the company, with a total investment of 251 million yuan and a planned construction period of 18 months; the company expects to achieve annual operating income of 350 million yuan, net profit of about 100 million yuan, internal profit of about 100 million yuan, internal return after tax of 17.64%, and a payback period of 6.78 years for static investment after tax (including construction period).

Risk factors: The company's new product development falls short of expectations; the company's customer concentration is high; the prospects for the satellite communication market are uncertain; core technology is leaked; market competition intensifies; preferential tax policy adjustments, etc.

Investment proposal: Considering the impact of delayed delivery of some products, the company's 2023/24 net profit forecast was lowered to 11/280 million yuan (the original forecast was 28/40 million yuan, respectively), and the 2025 net profit forecast was increased by 390 million yuan. The corresponding EPS forecast was 0.68/1.74/2.44 yuan, respectively. The company's current stock price corresponding to 2023/24/25 PE is 79/31/22 times. Currently, the comparable companies Zhenxin Technology, Guobo Electronics, Aerospace Electronics, and Xinleineng Wind in 2024 unanimously predict that the corresponding PE will be 31/41/22/20 times, respectively. Referring to the valuation level of comparable companies, considering the company's deep technology accumulation in the field of high dynamic anti-interference, health, communication, and guidance, and its stable market position, as downstream models enter mass production one after another, performance may resume, giving the company 35 times PE in 2024. The corresponding target price is 60 yuan, maintaining the “buy” rating.