Key points of investment
Incident: On April 22, 2024, Kun Heng Shunwei released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 255 million yuan, up 15.08% year on year, and realized net profit of 87 million yuan, up 7.20% year on year; 2024Q1, the company achieved revenue of 248.05 million yuan, up 28.74% year on year, and achieved net profit of 3.0351 million yuan, up 10.82% year on year.
Steady performance in 2023+improved gross margin, and 2024Q1 continued to grow rapidly. In 2023, Kun Heng Shunwei achieved operating income of 255 million yuan, a year-on-year increase of 15.08%, and achieved net profit of 87 million yuan, an increase of 7.20% over the previous year. Mainly due to the improvement of the company's core product matrix, a steady increase in market share, and diversification of industry solutions promoted the gradual expansion of application fields; in 2023, the company increased its product line by 67.91%, with a year-on-year increase of 67.91%. The increase of 1.61 pct led to an increase in the company's profit. With 2024Q1, the company achieved revenue of 248.105 million yuan, an increase of 28.74% over the previous year, and achieved net profit of 3.0351 million yuan, an increase of 10.82% over the previous year. The main reason is that the downstream market demand for high-end test and simulation instruments continued to increase in the current period, market recognition of the company's core products continued to increase due to technical advantages, and revenue grew rapidly compared to the same period last year.
Wireless channel simulators have broken through the satellite and semiconductor markets, and orders for RF microwave products have been released. The competitive advantages of the company's leading products, wireless channel simulators, continue to be highlighted. With the continuous iteration of comprehensive performance and functions, they gradually formed important breakthroughs in markets such as satellite communications and semiconductor testing; RF microwave signal generator products became more mature, continued to be recognized by downstream users, and the order volume grew rapidly, contributing significantly to the company's performance; the new product spectrum/vector signal analyzer was gradually introduced into various downstream users for testing and trial, and certain orders were formed; the performance of general receivers and other products under the HBI architecture gradually reached the level of overseas competitors and was recognized by customers. With the continuous enrichment of the company's product matrix and the accumulation of industry applications, the advantages of the company's system-level solutions are becoming more and more obvious. They have expanded from radio testing and simulation to solutions such as simulation training and digital twins in electromagnetic environments, which can better meet the testing and simulation needs of customers in various industrial units and various field application scenarios.
High-end test and simulation instruments break the monopoly and increase market competitiveness and recognition. Kun Heng Shunwei focuses on the R&D, production and sales of high-end radio testing and simulation instruments, and is committed to providing high-performance test solutions for mobile communications, wireless networking, vehicle networking, navigation, etc. The company has mastered four core technologies, including high-end RF microwave technology, digital circuit technology, real-time signal processing technology for radio test and simulation algorithms, and non-real-time signal processing technology. In 2023, the field of high-end radio test and simulation instruments achieved revenue of 240 million yuan, an increase of 13.08% over the previous year. In the context of domestic high-end electronic measuring instruments relying on imports for a long time, the company is one of the few domestic companies focusing on the development of high-end radio testing and simulation instruments. The core products broke the long-term monopoly of international manufacturers such as American Technology and Germany's Rohde and Schwarz. During the reporting period, the market share of the company's core products increased steadily, and the competitiveness of the radio test and simulation instrument manufacturer industry and downstream customer recognition steadily increased.
The self-developed HBI platform had significant benefits and was successfully applied in the field of interstellar networking. The HBI platform is a radio test and simulation instrument development platform independently developed by Kun Heng Shunwei. Based on the platform, the company independently developed a variety of modular components. In 2023, HBI modular component products achieved revenue of 12.5558 million yuan, an increase of 87.05% over the previous year. HBI series products cover interfaces such as CAN, RS485, RS422, LVDS, etc., and have voltage acquisition, high and low level generation, and digital signal processing functions. It can participate in testing as a semi-physical analog networking node, and finally realizes functions such as discrimination, statistics, storage and comparison of data messages. Based on the HBI platform, the company preproduces or manufactures generalized and standardized hardware modules based on the HBI platform. According to product specifications or order requirements, the hardware modules are assembled into a complete machine, and loaded with generalized and standardized software and firmware to form standardized products. Based on standardized software and firmware, certain technical developments are carried out to form customized products. The company gave full play to the advantages of the HBI platform's autonomy and control, and has now been successfully applied to the field of interstellar networking.
Investment advice: The company is one of the few domestic enterprises focusing on the development of high-end radio test and simulation instruments. After a long period of accumulation, the company has mastered the core technical system for the development of high-end radio test simulation instruments. We forecast the company's 2024-2026 revenue of 3.30/4.27/546 million yuan, a year-on-year increase of 30.3% /29.3% /27.9%, and net profit to mother of 1.13/1.50/197 million yuan respectively, up 29.2%/32.9%/31.5% year-on-year, corresponding EPS of 1.34/1.78/2.34 yuan and PE of 28.0/21.0/16.0. The first coverage gave it an “increase” rating.
Risk warning: New product development falls short of expectations; business development falls short of expectations; market competition intensifies, etc.