Incident: On December 20, 2023, the company disclosed the “Notice on Obtaining Orders for Customer Task Requirements”. The total order amount was about 133 million yuan (tax included), accounting for 25% of the company's revenue in 2022. The mission requirements covered airborne embedded computers, mobile embedded computers, vehicle embedded computers and other related modules.

The company has a rich project reserve and is growing every year. 205 new projects were added in '22, and 102 new projects were added in the first half of '23. The implementation of this order also shows that the company's downstream demand continues to improve, and we are firmly optimistic about its future development. The comprehensive review is as follows:

We have received 130 million new orders including tax, with strong fundamentals and worry-free long-term development. In terms of business, the company's main product, embedded computers, is the core of intelligent equipment. Demand for downstream aviation equipment and guidance equipment has been determined over a long period of time. At the same time, the company is also forward-looking at emerging fields such as drones and satellite Internet, continuously expanding growth boundaries. In terms of orders, as of the end of 2023Q3, the company had orders of 550 million yuan (including oral orders), of which missile projects accounted for nearly 50% (higher than that of airborne projects), and were developing rapidly. The company's 2023.12.20 announcement added a total of about 133 million yuan (tax included) to orders related to airborne, missile-borne, and in-vehicle embedded computers, accounting for 24.58% of the company's 2022 revenue, demonstrating the company's strong ability to continuously obtain orders.

The project reserves are abundant, and the company expects a number of important models to be released in the next 5 years. In terms of new research projects, the company attaches great importance to R&D investment. 2021, 2022, and 2023Q1-3 are all over 20%, investing in various fields such as airborne, missile, vehicle, shipborne, spacecraft, etc. At the same time, the company has abundant project reserves and is growing every year. 205 new projects were added in '22 and 102 in the first half of '23. The R&D investment results are remarkable, and there is plenty of momentum for future development. In addition, the company's many important models, such as airborne and missile carriers, are in the mass production, prototyping, or engineering prototyping stage. It is expected that batch delivery will be carried out from 2024 to 2027. The cumulative estimated delivery amount will reach 5.1 billion yuan, demonstrating strong demand.

The issuance of convertible bonds is progressing in an orderly manner, and it is intended to be used for projects such as capacity expansion and R&D center construction. The company plans to raise no more than 401 million yuan in total capital by issuing convertible bonds to unspecified targets for projects such as embedded computer capacity expansion, supplementary investment and construction, R&D center technological transformation, etc., and supplementary working capital. On December 9, 2023, the company responded to the second round of inquiries from the Shanghai Stock Exchange about the company's issuance of convertible bonds, and the work progressed in an orderly manner. However, the company's issuance of convertible bonds still needs to pass review by the Shanghai Stock Exchange and obtain approval from the China Securities Regulatory Commission before it can be implemented.

Investment suggestion: The company is a leading private enterprise in the special embedded computer industry. It benefits from the integrated development of mechanization, informatization, and intelligence of the “14th Five-Year Plan” equipment. The informatization market space in the field of special electronics is large, and the company may be expected to benefit deeply. In addition, the company is also forward-looking and deploying a wide range of emerging fields such as drones and satellite internet, and may be expected to achieve major breakthroughs in the future. We estimate that the company's net profit from 2023 to 2025 will be 128 million yuan, 191 million yuan, and 274 million yuan. The current stock price corresponding to PE from 2023 to 2025 is 35x/24x/17x, maintaining the “recommended” rating.

Risk warning: Downstream demand falls short of expectations, changes in prices and profit margins, etc.