Event: On March 19, the company released its 2023 annual report. During the reporting period, the company achieved total revenue of 3503.5941 million yuan, a year-on-year decrease of 1.55%; net profit attributable to shareholders of the parent company was 318.3812 million yuan, a year-on-year decrease of 60.27%. By the end of 2023, the company's total assets were RMB 7919.674 million, up 5.01% from the beginning of the period; shareholders' equity attributable to the parent company was RMB 5415.736 million, up 2.55% from the beginning of the period.

Actively operate and improve the company's product promotion strategy. The joint stock company organizes in-depth customer base visits, conducts research focusing on current trends and competitive patterns in the circuit and potential industries, continuously adjusts the customer structure and product structure, improves the company's product promotion strategy, and strengthens management, labor and cost control measures. Based on the economic situation and market supply and demand, the company adjusted the prices of some products appropriately and actively consolidated its market share. We also carry out in-depth exchanges with universities to promote industry-university-research cooperation, solve practical product problems through research on specific topics, and promote product quality improvement.

R&D and innovation to accumulate enterprise growth potential. The company attaches great importance to technological innovation. It has many R&D centers in Quanzhou, Guangzhou, Chengdu and Xiamen to enhance the core competitiveness of self-developed products. In 2023, the company invested 144.8756 million yuan in R&D expenses, an increase of 35.44% over the previous year, continuously enriching the development and promotion of the company's main products, injecting new impetus into the company's sustainable development. During the reporting period, the performance, quality and supply capacity of the company's main series of products were improved, and continued to jointly carry out core technical research with many domestic and foreign electrode paste and porcelain powder suppliers, develop corresponding solutions, and achieve technical support for the localization of raw materials for existing products. The company strengthens intellectual property protection for key core technologies and actively applies for relevant patents. By the end of the reporting period, the company had 568 active patents, including 98 invention patents, 441 utility models, 29 design designs, and 21 integrated circuit layout designs.

Intelligent manufacturing, consolidating the data base. During the reporting period, the company fully implemented the 2023-2024 action plan based on the intelligent manufacturing strategy to improve yield, consolidate the data base, build an efficient and accurate intelligent manufacturing enterprise, and gradually digitize manufacturing workshops, automate quality inspection, intelligent warehousing and distribution, accurate customer service, and process operation management. Production efficiency, product quality and customer service capabilities were simultaneously improved. The company's “online operation monitoring scenario” was successfully selected as the 2023 National Intelligent Manufacturing Excellent Scenario.

Optimize corporate governance and internal control to promote high-quality development. During the reporting period, the company continued to deepen its level of governance and was committed to promoting the high-quality development of the company. In order to more fully fulfill its social responsibilities and enhance transparency, the company actively disclosed the 2022 ESG Report and changed the name of the “Board Strategy Committee” to the “Board Strategy and ESG Committee”, adding ESG management responsibilities and simultaneously revising the rules of procedure to ensure that the ESG concept penetrates into all levels of the company and helps the company develop steadily over the long term. According to the requirements of the latest rules, the company comprehensively sorts out the internal control context, control environment, management execution, information transmission, etc. of the joint stock company and its subsidiaries, and revises the “Internal Control Manual” to ensure the application and rationality of internal control, and supervise the implementation and improvement of various systems, thereby ensuring the company's compliant operation. During the reporting period, the company's internal control system operated effectively and with high quality.

Party building leads to the sustainable and healthy development of the company. The company leverages the important position of party building in corporate governance to ensure the good operation and steady development of the company, improve the corporate governance structure, establish and improve internal management and control systems, strengthen risk management and promote the company's sustainable and healthy development. In 2023, the company's Party Committee and Discipline Inspection Commission were established one after another. Party building work and discipline inspection work were carried out comprehensively, and the central idea of clean construction was established, and a first-class team and first-class style of work provided a strong guarantee for the successful completion of the company's various tasks.

Investment advice: Torch Electronics was founded in 1989. As one of the first enterprises in China to pass astronautical-grade product certification, the company's products are widely used in aviation, aerospace, ships, communications, electricity, rail transit, and new energy. In January 2015, the company was listed on the Shanghai Stock Exchange (stock code:

603678). Adhering to the mission of “country, responsibility and global competition”, the company lays out three strategic segments of “components, new materials and international trade”, and has built three intelligent production bases in Quanzhou, Guangzhou and Chengdu, as well as three operation centers in Beijing, Shanghai and Shenzhen. Make every effort to promote independent research and development of core product technology. While promoting endogenous growth, we are actively extending to other types of component products with channel and technological synergy effects, using “inheriting innovation and a hundred year torch” as the corporate vision, promoting industrial upgrading through high-quality and efficient development, and contributing to the development of China's electronic components and new materials industry. According to model estimates, net profit due to mother from 2024 to 2026 is estimated to be RMB 4.69, 5.66, and RMB 749 million, respectively, and EPS is 1.02, 1.23, and 1.63 yuan, respectively, and the corresponding P/E is 19.9, 16.5, and 12.5 times, respectively. Give it an “gain” rating.

Risk warning: risk of changes in downstream market demand; risk of market competition; management risk due to expansion of business scale; management of accounts receivable and risk of bad debts.