Incidents:

The company released the “2023 Annual Report” after closing on March 28, 2024.

Comment:

Revenue achieved steady growth, and the ammunition business performed well

In 2023, the company achieved total revenue of 663 million yuan, a year-on-year increase of 22.58%; achieved net profit of 96.256 million yuan, a year-on-year increase of 27.73%; realized net profit withheld from mother of 61.774 million yuan, a year-on-year decrease of 13.13%. The main reasons for the decrease include changes in sales structure, product price reduction, and increased localization rate. The cost growth rate was greater than the revenue growth rate. By product segment, airborne products achieved revenue of 342 million yuan, up 8.04% year on year, gross margin of 47.59%; ammunition products achieved revenue of 225 million yuan, up 80.65% year on year, gross margin of 36.39%; and other products (including vehicles, ships and others) achieved revenue of 94 million yuan, a decrease of 4.87% year on year.

Continue to increase investment in R&D to promote product technology progress

The company continues to increase investment, promote the improvement of the core competitiveness of new technology platforms, and make continuous progress in various technical directions such as next-generation avionics buses, ultra-high speed inter-board interconnect buses, image sensing and intelligent processing, and inertial signal acquisition and processing. In the direction of computational control, it continues to adapt to mainstream processor platforms and domestic operating systems, pre-research and verification of multiple new processing platforms, and successfully implemented in systems such as flight control computers, mission computers, and visual navigation computers in the field of drones. In the direction of signal processing, it mainly improved the team's AI processing capabilities, and completed the operation of various mainstream AI network models such as LeNet on multiple mainstream AI platforms. In the direction of mass storage, the file system has been optimized, and the development of a new type of file system has begun. In the graphic image direction, infrared image readout is mature for application, packaging, and mass production at 640*512 resolution, and technical pre-development and technology accumulation have been completed at 1K resolution.

Continuously expand the market area and expand the variety of products that customers cooperate with

The company focuses on product lines such as interface control, data processing, signal processing, graphic images, high-reliability power supplies, data acquisition, communication exchange and high-capacity storage products, and is deeply cultivating customers and seeking more opportunities for cooperation. In response to the policy of “high quality, low cost and sustainable development” of national equipment, we implemented low cost demonstration, low cost design, and low cost manufacturing. The results were obvious and were highly recognized by customers. The company is participating in more and more diverse models of products, and there are more and more participating subsystems. The company focuses on in-depth customer cooperation and has expanded the range of cooperative products. Horizontal cooperation with different customers and different extension systems of key models has been strengthened. The number of cooperating units and projects of the same model has increased markedly, the quality of projects has improved, and the value of individual projects has increased. Currently, key models and key subsystem units are participating. The company plans and lays out ahead of time around key units, increases investment from key customers, and increases the company's market share.

Profit forecasting and investment advice

The company focuses on the field of embedded computers. With the continuous development of the domestic military information technology industry, there is plenty of room for future growth. The company's revenue for 2024-2026 is estimated to be 818, 10.08, and 1,238 million yuan, net profit due to mother of 1.32, 1.74, and 224 million yuan, EPS of 1.75, 2.31, 2.98 yuan/share, corresponding PE of 24.78, 18.77, and 14.58 times. Maintaining a “buy” rating considering the industry's room for growth and the continued growth of the company's business.

Risk warning

Risk of technology development; risk of high dependence on national key sector groups and high customer concentration; risk of procurement of core raw materials; risk that fluctuations in orders may cause fluctuations in the company's performance; risk of changes in product prices and gross margin; turnover and recovery risks due to large accounts receivable, etc.