Key points of investment
Incidents: In the first three quarters of 2023, the company achieved operating income of 619 million yuan, a year-on-year decrease of 12.41%; net profit of 40 million yuan, a year-on-year decrease of 47.98%; net profit after deducting non-return net profit of 17 million yuan, a year-on-year decrease of 67.69%, mainly due to a year-on-year decline in sales of communications products and defense products. On a quarterly basis, 2023Q3 achieved revenue of 204 million yuan, down 8.18% year on year, down 13.96% month on month; net profit was 2,05331 million yuan, down 239.62 million yuan year on year and 239.28 million yuan month on month.
Gross margin increased month-on-month in the third quarter. In the first three quarters of 2023, the company's overall gross profit margin was 29.42%, down 0.62 pct year on year; net profit margin was 6.41%, down 4.38 pct year on year; and weighted average return on net assets was 3.72%, down 5.86 pct year on year. 2023Q3, the company's gross profit margin was 29.80%, up 2.12pct year on year, up 0.17pct month on month; net profit margin was 1.01%, down 10.71 pct year on year, down 9.96 pct month on month.
In the first three quarters of 2023, the company's total period expenses were 175 million yuan, up 6.96% year on year, accounting for 28.25% of total revenue, and revenue increased 5.12 pct year on year. Among them, R&D expenses were 69 million yuan, up 15.24% year on year, accounting for 11.12% of total revenue, and revenue increased 2.67 pct year over year. The total period expenses of the 2023Q3 company were 66 million yuan, up 21.09% year on year, up 6.73% month on month, accounting for 32.38% of revenue, up 7.83 pct year on year, and 6.28 pct month on month. Among them, R&D expenses were 225 million yuan, up 33.00% year on year, down 0.62% month on month, R&D expenses accounted for 12.44% of revenue, up 3.85 pct year on year, and 1.67 pct month on month.
The net cash flow generated from operating activities due to payment of increases in employee remuneration is negative. In the first three quarters of 2023, net cash flow from the company's operating activities was -16 million yuan, the same period last year was 112 million yuan, a year-on-year decrease of 28 million yuan, mainly due to a year-on-year increase in employee remuneration; net cash flow from investment activities was -70 million yuan, the same period last year was -110 million yuan, an increase of 39 million yuan; net cash flow from fund-raising activities was 572 million yuan, the same period last year was 97 million yuan, an increase of 475 million yuan.
As of the end of the third quarter of 2023, the company's accounts receivable, notes receivable and receivable financing totaled 622 million yuan, down 3.25% from the beginning of the year; of these, accounts receivable was 520 million yuan, up 24.85% from the beginning of the year, notes receivable were 65 million yuan, down 55.52% from the beginning of the year, and receivables financing was 37 million yuan, down 54.02% from the beginning of the year. As of the end of the third quarter of 2023, the accounts receivable turnover rate was 1.32 times; the company's inventory was 271 million yuan, up 21.92% from the beginning of the year, and the inventory turnover rate was 1.77 times.
We expect the company's net profit from 2023-2025 to be 1.01/1.27/160 million yuan, respectively, and EPS of 0.22/0.28/0.35 yuan/share, respectively. The PE corresponding to the closing price of November 9 will be 118.7/94.1/74.4 times, covering the “increase in holdings” rating for the first time.
Risk warning: Revenue recognition progress is lower than expected; market competition intensifies and consumer goods profits decline.