Introduction to this report:

Profitability increased steadily in 23Q3, with remarkable results in cost reduction and efficiency. The company has strengthened the research and development of new technologies in the RF chip business, and the annual framework procurement of 101 million yuan has been delivered one after another. Downstream demand remains strong, and high profit growth can be expected in the future.

Key points of investment:

The target price was raised to 111.50 yuan, maintaining an increase in holdings rating. Maintain an EPS of 1.68/2.07/2.61 yuan from 23 to 25. The company has strengthened product development and sales. Annual framework tenders and purchase orders for RF chip products for mobile phone terminals with sales volume of 101 million yuan have been delivered one after another, giving 52.9 times PE in 24 years. Comparable to the company's PE changes, the target price was raised to 111.50 yuan, maintaining an increase in holdings rating.

Profitability has been steadily increasing, and significant results have been achieved in reducing costs and increasing efficiency. From the beginning of 2023 to the end of the third quarter, it achieved operating income of 2,826 billion yuan (+6.19% year-on-year) and realized net profit of 411 million yuan (+6.52% year-on-year). The company's performance continued to improve, and profitability increased steadily. In Q1-Q3 of 2023, gross margin reached 32.25% (+1.08% yoy); net profit margin reached 15.93% (+0.83% yoy), indicating that the company achieved remarkable results in reducing costs and increasing efficiency within the company.

Strengthen research and development of new technologies in the RF chip business, and deliver 101 million yuan of annual framework purchases one after another.

1) The company continues to increase R&D investment and product marketing in communication terminals and vehicle radio frequency products. In the third quarter of 2023, the company invested 84 million yuan in R&D (+1.12% year-on-year), and R & D investment accounted for 9.28% of revenue. 2) Recently, the company received an annual framework bidding and procurement notice for RF chip products for mobile phone terminals. The framework procurement cycle is from half year 2023 to half year 2024, which is expected to generate sales of 101 million yuan. Currently, it is being delivered one after another according to purchase orders signed with customers. 3) The military industry is booming during the 14th Five-Year Plan period. Demand for T/R components and RF chips will continue to increase, providing stable growth space for supply companies.

Catalyst: The annual framework bidding and procurement of 101 million mobile phone terminal RF chip products has been delivered one after another.

Risk warning: raw material cost control falls short of expectations, and the promotion of 5G commercial construction falls short of expectations