Core views:
Incident: The company announced its report for the third quarter of 2023. The first three quarters achieved revenue, net profit to mother, and net profit without return to mother of 28.26, 4.50, and 411 million yuan, respectively, up 6.19%, 12.05%, and 6.52% year-on-year; in the third quarter, revenue, net profit to mother, and net profit without return to mother were 9.05, 1.41, and 130 million yuan, respectively, up -2.23%, 1.35%, and -1.71% year-on-year respectively.
Comment: Performance in the first three quarters achieved steady growth, downstream terminal applications continued to expand, and TR module leaders can be expected to develop in the medium to long term. On the revenue side, demand in the downstream high-end equipment and civilian sector is steady. 23Q3 revenue decreased by 2.23% compared to 22Q3 and 26.1% month-on-month. It is expected that with the gradual clarification of the subsequent new round of equipment procurement and breakthroughs in the terminal civilian market, downstream demand is still expected to be stable, moderate and positive. On the profit side, the company's gross margin for 23Q3 was 33.70%, up 2.94 and 2.24pcts from 22Q3 and 23Q2 respectively. Judging that it was mainly affected by product restructuring, such as an increase in the revenue share of high-value-added high-end equipment products. Also affected by the continuous development of downstream markets, etc., the company's 23Q3 management expenses rate and period expense ratio increased by about 1.8 and 0.3 pcts, respectively, compared to 22Q3. In terms of net interest rate, 23Q3 net margin was 15.64%, up 0.55pcts from 22Q3. On the balance side, the company's inventory at the end of 23Q3 was 804 million yuan, a year-on-year decrease of 32.25%. The company's downstream terminal applications continued to expand during the reporting period. According to the company's September announcement, it recently received the customer's annual framework tender and procurement notice for RF chip products for mobile phone terminals. The procurement period is from half year 2023 to half year 2024. According to the company's preliminary estimates, this framework procurement is expected to result in product sales of 101 million yuan, an increase of 2268.57% over the previous year.
Profit forecast and investment advice: Expected results for 23-25 are 1.53/1.89/2.30 yuan/share, respectively.
Taking into account the scale and technical advantages of the company's T/R components in high-end domestic equipment and the expansion prospects of the civilian downstream terminal market, combined with comparable company valuation levels, the company's competitive position had a certain leading edge. The company was given a PE valuation of 60 times in 23 years, corresponding to a reasonable value of 91.51 yuan/share, maintaining the “gain” rating.
Risk warning: capacity construction falls short of expectations; equipment delivery expectations are low; risk of policy adjustments, etc.