Incident: The company released its 2023 annual report, achieving full year revenue of 745 million yuan, a year-on-year decrease of 18.21%; realized net profit of 90 million yuan, a year-on-year decrease of 45.59%.
The overall growth rate of the industry has slowed+military tax reform, and both revenue and gross profit have declined. In 2023, the Q4 net interest rate improved significantly. In 2023, the company achieved operating income of 745 million yuan (-18.21%), net profit to mother of 90 million yuan (-45.59%); net profit without return to mother was 83 million yuan (-48.76%), mainly affected by the gradual price reduction of products and military tax reform. 2023Q4 achieved revenue of 168 million (-16.66%), net profit of 36 million yuan (-2.91%), and a net sales margin of 21.95% (+5.05pct), the highest in a single quarter since 2022.
By product, the company's microwave devices/nuclear industry equipment and components/other civilian products achieved revenue of 2.93 (-39.83%) /3.73 (+1.31%) /0.69 (+37.39%) billion yuan, respectively, and gross margins of 41.13%/24.86%/12.81%, respectively.
Profitability has declined due to multiple fluctuations in the industry
In terms of profitability, the company's gross sales margin/net margin in '23 was 30.01% (-5.02pcts)/12.12% (-6.10pcts), respectively, and the sales/management/ R&D expense ratios were 2.32% (+0.9pct)/8.09% (+1.48pct)/5.24% (+0.34pct), respectively. In addition, the company's accounts receivable at the end of 2023 were $749 million, up 21.88% from the beginning of the period; inventory was $245 million, down 1.41% from the beginning of the period; and advance payments were $03 million, down 36.91% from the beginning of the period.
Implement a restricted stock incentive plan to begin a new stage of development
The company plans to issue 1 million common shares to 2 core technicians and 61 core key personnel, accounting for 0.92% of the total share capital. It plans to grant 905 million shares for the first time, at a grant price of 39.76 yuan/share. The total cost of the initial grant required amortization was $17.18 million, and the distribution over 24-27 was $568/697/350/1.02 million, respectively. This time, equity incentives were unlocked in three installments. The trigger value for unlocking conditions was net profit of not less than 128/1.84 billion yuan for 24-26 years; reaching the target value of 1.6/23/320 million yuan can be unlocked at 100%, corresponding to a three-year compound growth rate of 52.6%.
With electric vacuum+solid state two-wheel drive, it is expected that the nuclear fusion field will continue to release microwave devices produced by the company, which have been equipped with many related mainframe factories and research institutes in China. Meanwhile, since the conflict between Russia, Ukraine, and Israel, new forms of warfare represented by drone attacks and defense have driven the development of phased array radars and their solid-state devices.
In the nuclear industry, the deflectors and cladding systems produced by the company are key components of the ITER project. The deflectors have been applied to tokamak devices such as HL-3; the vacuum high-temperature helium leak detection equipment manufactured and commissioned by the company is the first in the world to meet ITER requirements, and is actively accelerating the acquisition of “nuclear safety equipment design and manufacturing licenses”.
The low-orbit satellite market continues to advance, and the prospects for core components of Hall propellers are promising. Low-orbit satellites have developed rapidly in recent years, and electric propulsion systems represented by low-power Hall thrusters are expected to be used in more satellite constellations. The core components of the Hall electric propeller developed by the company have been successfully used in manned space engineering (space station sky and core module), and various models have entered the engineering application stage. The company has established deep cooperative relationships with various electric propulsion units, actively tracks orders in the field of commercial aerospace small satellites, and has achieved small-batch sales.
Profit forecast: The company has formed a system of microwave devices, nuclear industry equipment and components, and other civilian products. The company's net profit from 2024 to 2026 is estimated to be 1.74/2.52/349 million yuan, respectively, with a corresponding EPS of 1.60/2.32/3.22 yuan, and a corresponding PE of 35.40/24.41/17.58 times. This is the first coverage, giving it a “recommended” rating.
Risk warning: risk of gross margin fluctuation, risk of mass production of first wall (FW) and nuclear pump products, macro-environmental risk.