Event: The company issued a pre-increase announcement for the 2023 annual results

The company's net profit to mother is expected to increase by about 60% year-on-year in 2023

The company is expected to achieve a net profit of about 500 million yuan in 2023, an increase of about 60% over the previous year. This is mainly due to the company continuing to increase R&D investment and new product development efforts, and actively explore the market and expand sales. Looking at a single quarter, 2023Q4 is expected to achieve a net profit of about 110 million yuan to mother, a year-on-year decrease of about 14%.

The 2023 performance improved significantly: the low point of special equipment procurement has passed, and the product category continues to expand 1) As several deferred projects move into the normal delivery stage, the company's performance improved significantly in 2023. The year-on-year growth rates of 22Q4-23Q3's revenue were 64%, 77%, 55%, and 41%, respectively, and the year-on-year growth rates of net profit to mother were 13%, 471%, 79%, and 85%, respectively. The improvement trend is obvious.

2) The company's gross profit margin for the first three quarters of 2023 was 50.4%, up 3.3 pct year on year, mainly due to the resumption of normal delivery of high-margin military goods; the net profit margin was 13.4%, up 2.8 pct year on year.

3) The company continues to expand overseas markets such as outdoor sports. In the first half of '23, overseas business revenue was 650 million yuan, an increase of 22% over the previous year. At the same time, the company has obtained targeted projects from many companies, including BYD and Didi, in the automotive infrared field, and continues to establish cooperative relationships with OEMs, Tier 1, and autonomous driving companies.

Unrefrigerated infrared faucet, special product volume+civilian product expansion drive high performance growth 1) Special field: The company is a non-refrigerated infrared core supplier, and has obvious advantages in individual military equipment and small guided weapons. In the future, the company's business will continue to expand from gun targeting to guidance, from unrefrigerated to refrigeration, and from infrared to microwave/laser. The company's silicon-based millimeter wave integrated circuit has completed the design of an intermediate frequency chip for a satellite Internet broadband terminal supported by a national ministry and a central enterprise group. The T/R module won the bid for a research institute's linear array module development project, and has entered the application field of high-performance accurate guidance components. With the batch production volume of related models, it is expected to further open up new space for the company's special business.

2) Civilian sector: The company's outdoor thermal camera products rank in the leading position in the industry. With product strength and cost advantages brought by the entire industry chain, the company's new North American market is expected to replicate past success in the European market. In addition, new applications such as drones and vehicles are also expected to drive the rapid growth of the company's business.

Having successfully issued 1.56 billion yuan of convertible bonds to expand production, the company's competitiveness is expected to further enhance the company's competitiveness. The company will complete the issuance of convertible bonds in January 2023, with a total issuance amount of 1.56 billion yuan. The funds raised will be used for pilot research and development projects for infrared thermal imaging machines and intelligent photoelectric sensors. Through this capital raising and production expansion, the company's market competitiveness in the infrared and optoelectronic fields is expected to be further enhanced.

Ruichuang Weina: The compound net profit growth rate for 2023-2025 is expected to be 38%. The company's net profit to mother in 2023-2025 is estimated to be 5.00, 6.62, and 822 million yuan, respectively, up 60%, 32%, and 24% year-on-year, and CAGR = 38%, corresponding to PE of 32, 24, and 19 times, maintaining a “buy” rating.

Risk warning:

1) Special orders fell short of expectations; 2) Overseas business expansion fell short of expectations.