Incident: The company released its 2024 quarterly report. Q1 achieved operating income of 159 million yuan, a year-on-year decrease of 3.85%; realized net profit to mother of 0.29 million yuan, an increase of 40.85% over the previous year; net profit after deducting non-return to mother was 28 million yuan, an increase of 38.63% year on year.
The gross margin of the 24Q1 core business rebounded, and net profit to mother increased sharply in 2024Q1. The company achieved operating income of 159 million yuan (-3.85%), net profit of 0.29 million yuan (+40.85%), and net profit after deducting non-return to mother of 0.28 million yuan (+38.63%). This is mainly due to the increase in the gross margin of Q1's gross margin of nuclear industry equipment and components and microwave devices compared to the same period last year. In 2023, the company achieved operating income of 745 million yuan (-18.21%) and net profit of 90 million yuan (-45.59%) due to multiple effects of product price reduction and military tax reform.
23Q4 net margin improved significantly, and 24Q1 profitability remained at a high level. Judging from profitability, 2024Q1's gross sales margin/net margin was 40.81% (+10.16pcts)/18.09% (+5.74pcts), respectively, and the company's profitability increased significantly. In 2023, the company's gross sales margin/net margin was 30.01% (-5.02pcts)/12.12% (-6.10pcts), respectively. Among them, 23Q4 achieved a net sales margin of 21.95%, the highest in a single quarter since 2022.
Implement a restricted stock incentive plan to begin a new stage of development
Recently, 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 such as traveling wave tubes produced by the company, which are already 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 world's first cladding component that meets ITER requirements; the company is speeding up 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, the corresponding EPS is 1.60/2.32/3.22 yuan, and the corresponding PE is 40.60/28.00/20.17 times, maintaining the “recommended” rating.
Risk warning: risk of gross margin fluctuation, risk of mass production of first wall (FW) and nuclear pump products, macro-environmental risk.