Incident: Su Test revealed the 2023 annual report. The company achieved revenue of 2,117 billion yuan in 2023, an increase of 17.26%; realized net profit to mother of 314 million yuan, an increase of 16.44%; and gross profit margin of 45.6% in 2023, a year-on-year decrease of 1.06 pcts.
The gross margin of the environmental test business has increased, and the H2 net margin repair of the integrated circuit business is clearly viewed from the company's main business level. Both the environmental test business and integrated circuits have developed well in 2023. At the environmental and reliability business level, the company achieved revenue of 1,003 billion yuan in 2023, an increase of 19.45% year on year, and gross margin increased 1.85pcts year on year to 58.80%. We believe that the increase in the gross margin of the environmental testing business shows that in the context of industry adjustments, the company has still optimized its testing capabilities and operating efficiency, and has further stabilized its leading position in the industry.
At the integrated circuit business level, the company achieved revenue of 258 million yuan in 2023, a year-on-year increase of 2.34%, and gross margin decreased by 13.80 pcts to 43.28%. We believe that the decline in gross margin in the integrated circuit business is mainly due to the company's 2023 H1 active reserve inspection technicians, thus increasing rigid expenses. As can be seen from the net profit split of the subsidiary Sushiyite (integrated circuit business entity), Shanghai Yite's 2023 H1 net interest rate was 2.85%, and the annual net interest rate was 15.60%, which is an obvious recovery. We believe that the company has begun to improve the efficiency of the integrated circuit business. If the company continues to invest in integrated circuit equipment in 2024, the net profit margin of this business is expected to be further repaired.
The core business is operating steadily, and the automobile rail transit business is growing rapidly
The company's major businesses grew steadily in 2023, including electronic and electrical revenue of 889 million yuan, up 14.71% year on year; aerospace revenue of 268 million yuan, up 12.48% year on year; and revenue of research and testing institutions of 412 million yuan, up 23.94% year on year. At the same time, automobile and rail transit revenue was 192 million yuan, up 35.76% year on year, and the growth rate was higher than other traditional businesses. We believe that the first reason for this is that the company actively lays out civilian product testing and opens up business boundaries; secondly, the domestic NEV sector is developing well, and the demand for corresponding testing is abundant. As the Soviet test continues to cultivate in the field of automobile rail transit, the company's revenue structure is expected to continue to be optimized to offset the risk of industry fluctuations.
The detection capability circle is expanding steadily, and it is expected to enter the field of low-altitude economy
In 2023, the company continued to invest in research and development, steadily expanding the scope of testing. According to the company's annual report, the 2023 Soviet test has completed prototype production of the “Aerospace Product Thermal Vacuum Test System Series”. This series of products has the ability to provide test equipment and services in the aerospace field, laying the foundation for the company's future technological innovation in the field of high altitude and low air pressure and low-altitude aircraft tests. In March 2024, four departments including the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Ministry of Finance, and the Civil Aviation Administration of China jointly issued the “Implementation Plan for Innovative Application of General Aviation Equipment (2024-2030)”. General aviation equipment is the main body of the low-altitude economy. If China's low-altitude economy industry continues to develop, the Soviet test is expected to rely on current inspection capabilities and enter the field of low-altitude economic testing.
New production capacity is being invested in an orderly manner, and several projects will be put into operation in 2024 H2
The value of the company's projects under construction at the end of 2023 was 163 million yuan, an increase of 77.17% compared with 92 million yuan at the end of Q3 2023. We believe that the increase in the company's ongoing construction is mainly due to the company's continuous construction and testing capacity. According to the company's 2023 annual report, in order to quickly respond to the needs of downstream customers in the fields of new energy, wireless communication, etc., the company has accelerated the construction progress of the NEV product testing center expansion project and the fifth-generation mobile communication performance testing technology service platform project. It is expected to be officially put into operation in the second half of 2024, and the company's testing production capacity will be further increased. We believe that the Soviet test will rely on a strong sense of expansion and expansion ability to achieve business expansion in various fields and gradually grow into a comprehensive testing leader.
Investment advice:
We forecast that the company's revenue for 2024-2026 will be 25.53/31.79 billion yuan, up 20.6%/24.5%/23.7% year on year; 2024-2026 net profit will be 3.81/4.84/631 billion yuan respectively, up 21.2%/27.2%/30.4% year on year; corresponding PE will be 19/15/12 times, respectively. We believe that the technical barriers of the test equipment, test service capabilities, and the company's expansion potential have not changed. Short-term factors disrupted immediate results but did not hinder long-term trends. In the future, the Soviet test test is expected to gain room for incremental development in the integrated circuit, EMC sector, and low-altitude aircraft inspection sector. The target price for 25XPE in 2024 is 18.75 yuan for 6 months, maintaining a “buy-A” rating.
Risk warning: The expansion of new businesses and new segments falls short of expectations, and industry competition intensifies.