Event: The company released its annual report for 2023 and the report for the first quarter of '24. For the full year of '23, the company achieved revenue of 250 million yuan, an increase of 15.1% year on year; net profit to mother was 90 million yuan, an increase of 7.2% year on year. In Q1 '24, revenue of 24.811 million yuan was achieved, up 28.7% year on year; net profit to mother was 3,035 million yuan, up 10.8% year on year.
Demand for high-end simulators is growing, and the product matrix is rapidly improving. In the Q4 quarter of '23, the company achieved revenue of 90 million yuan, a year-on-year decrease of 10.1%; net profit to mother was 0.3 billion yuan, a year-on-year decrease of 24.2%. Looking at the company's performance throughout the year, the main reason is that its products have made important breakthroughs in markets such as satellite communications and semiconductor testing, and sales of new products have grown rapidly. In Q1 '24, the company's performance grew rapidly. New products such as RF microwave signal transmitters and analytical instruments were rapidly introduced by customers. As demand for testing such as 5G-A and satellite internet rises, the company's 24-year performance is expected to grow further.
Gross margin increased, and R&D investment continued. In terms of expenses, the company's sales expenses rate in '23 was 9.2%, yoy+0.7pp; management expenses ratio was 6.1%, yoy+1.1pp; R&D expenses rate was 22.4%, yoy+6.6pp.
The reason for the increase in management expenses is due to an increase in equipment depreciation and amortization. The reason for the increase in R&D expenses is due to the increase in the company's investment in new products and the increase in material costs. In terms of profit margin, the company's gross margin in '23 was 68%, yoy+1.5pp, net profit margin was 34.4%, yoy-2.3pp. The increase in gross margin benefited from the increase in the company's share of sales of high-end measuring instruments. The decline in net interest rate was mainly due to the increase in the company's R&D investment in that year. We expect the net interest rate level to rise rapidly as the company's new products are introduced into the market.
Focusing on key markets such as satellites, the downstream sector is expected to explode. The company focused on the forward-looking needs of key industries, helped the China Mobile Industry Research Institute complete ground communication tests and space environment adaptability tests based on the 3GPP R17NR NTN standard, and worked together to build an end-to-end link from analog terminals, channel simulators, and space-borne base stations to analog core networks, simulating the transmission environment with high dynamics, high latency, and strong attenuation faced during low-orbit satellite communication. China's Starnet has applied for spectral orbital resources for about 12,000 satellites from ITU, and it is expected that network launch will begin in '24. Demand for signal detection products will increase at that time. Furthermore, with the continuous advancement of 5G construction in China, the commercial launch of 5G-A, and pre-research on 6G technology, large-scale applications of related products in the fields of related communication equipment (such as base stations, mobile phones), the Internet of Things, the Internet of Vehicles, etc., there is an urgent need for high-performance radio test and simulation instruments to provide technical support for the R&D and production of related equipment. The company closely follows the development trend of 5G-A, conducts research on relevant testing and simulation technology around technical directions such as integration of heaven and earth and integration of synesthesia, provides a laboratory simulation and verification environment, and carries out preliminary research for related applications.
Profit forecasting and investment advice. EPS is expected to be 1.37 yuan, 1.83 yuan, and 2.53 yuan respectively in 2024-2026, corresponding PE is 27 times, 20 times, and 15 times, respectively. Referring to comparable company valuations and the company's future profit growth rate, the company was given 33 times PE in 24 years, corresponding to a target price of 45.21 yuan, to maintain a “buy” rating.
Risk warning: Risks such as the introduction of new products falling short of expectations and downstream market demand falling short of expectations.