The company focuses on high-reliability sensors and sensor network systems. Revenue growth is steady, and R&D investment is increasing.

The company is a technology-intensive enterprise. Its main business is R&D, design, production and sales of high-reliability sensors and sensor network systems, mainly including high-reliability sensors and sensor network systems. Currently, the company is in a period of performance growth. The first three quarters of 2023 achieved revenue of 223 million yuan, an increase of 10.85% over the previous year; net profit of the mother reached 61 million yuan, an increase of 5.40% over the previous year. Since 2020, the company has continuously increased R&D investment. R&D expenses in the first three quarters of 2023 reached 32 million yuan; a year-on-year increase of 24.09%; in the first half of 2023, the number of R&D personnel reached 89, an increase of 43.55% over the previous year.

The sensor market space is vast, and the military and civilian two-wheel drive industry is developing. Benefiting from surging demand for downstream applications, the global sensor market and the Chinese sensor market have maintained rapid growth. According to statistics from CCD Consultants, in 2017, the global sensor market was nearly US$125.8 billion, and is expected to grow to US$203.2 billion in 2023, with a compound annual growth rate of more than 8%. Among them, China's sensor market is expected to reach 431.9 billion yuan in 2025, with a compound annual growth rate of about 11%. Compared with traditional sensors, MEMS sensors using MEMS production technology are more widely used, which will further open up market space in the sensor industry. In the military sector, the market size is growing steadily. Among them, in the aerospace sector, China's space launch activities continue to be highly active, and in particular, the commercial space market is rapidly expanding under policy guidance; in the aviation sector, military aircraft supplements and upgrades will also cause demand for aviation sensors to continue to grow; furthermore, in the field of weapons equipment, as future forms of war tend to be informatized and intelligent, military sensors capable of sensing battlefield situations will become a pioneering infrastructure for national defense modernization, and future weapon equipment upgrades and intelligence are expected to rapidly increase sensor demand. In the civil sector, high-end industrial fields such as construction machinery, rail transit, and metallurgy, etc., the degree of intelligence is constantly increasing, and industrial sensors will be more widely used in the future. Furthermore, in 2020, the civilian sensor market was mainly dominated by foreign manufacturers. Foreign manufacturers accounted for about 60% of the market, and the middle and high-end market even reached 80%. In the context of the country's successive support policies, domestic production substitution in the industrial sector is expected to accelerate.

Self-developed chips lead growth, and IPOs are overfunded. At present, the company's MEMS technology involves many links in the industrial chain, and it already has the ability to design chips independently. Self-developed chips are progressing steadily. Mass production of diffusion-silicon MEMS pressure chips has been achieved, and SOI MEMS pressure chips have completed initial sample verification, and small-batch trial production has begun. Mass production is expected to be achieved by the end of 2023. Compared with purchased chips, self-developed chips have certain advantages in terms of operating temperature range, nonlinearity, and medium voltage resistance. Downstream military and civilian customers widely recognize the company's products. The top five customers account for 65.81% of sales revenue. Most of the downstream customers are central enterprise groups in the field, with high demand and stable cooperation. The company's IPO is overfunded, and the capital raised is used for production and testing centers and R&D capacity building. The company will expand its production capacity by 530,000 units in the future, and carry out R&D research in four major technical directions: MEMS sensor chip technology research and development, sensor network system platform technology research and development, and intelligent equipment operation and maintenance management system development. Liquidity has been greatly replenished, and the company's operating efficiency will be further improved.

Profit forecast: The company's current main business, military equipment, has clear demand-driven attributes, and has strong construction certainty at the current point in time. Combined with future domestic replacement demand for civilian products, the company is expected to achieve military and civilian two-wheel drive in high-reliability sensor products. At the same time, future wireless sensing is also the development trend of future sensors. The company's various businesses are expected to achieve rapid growth. Based on this, we estimate that the company's net profit from 2023-2025 will be 1.13/1.69/214 million yuan respectively, and corresponding PE will be 49/33/26 times, respectively, covered for the first time, and given a “buy” rating.

Risk warning: market competition risk, risk of R&D results not meeting expectations and iterative technology upgrades, risk of fluctuations in gross margin, risk of high customer concentration and a relatively high share of the largest single customer, and other business risks.