Incident: Recently, the company released the 2023 Annual Report and the First Quarter 2024 Report. In 2023, the company achieved operating income of 378 million yuan, a year-on-year increase of 3.03%; realized net profit of 88 million yuan, a year-on-year decrease of 27.94%; realized net profit after deduction of 85 million yuan, a year-on-year decrease of 27.72%.

2024Q1 achieved operating income of 104 million yuan, an increase of 45.16% year on year; realized net profit of 0.27 million yuan, an increase of 165.70% year on year; realized net profit after deduction of 0.27 million yuan, an increase of 176.87% year on year.

Affected by the slowing pace of downstream projects, the 2023 performance was under pressure, and strong growth resumed in 24Q1. In terms of profitability, the company's gross sales margin in 2023 was 65.47%, -2.07pct year on year, and the net sales margin was 23.20% and -9.97pct year on year, mainly affected by the slowdown in the pace of some downstream customer projects and increased investment in sales expenses and R&D expenses, which led to a decline in the company's main profit indicators; the company's R&D expenses rate in 2023 was 10.86%, +1.43pct year on year; the sales expense ratio was 14.61%, +3.22pct year on year; the management expense ratio was 11.90%, year on year + 0.49pct; financial expense ratio was -0.06%, +0.06pct year-on-year. In 24Q1, the company's gross sales margin was 67.27%, +1.79pct year on year; net sales margin was 26.19%, +11.87pct year on year; profitability increased significantly. At the same time, the company's 24Q1 contract debt was 22.9263 million yuan, compared to 177.302 million yuan in the same period last year, an increase of 29.31% over the previous year, reflecting the good order situation of the company.

The layout of a six-dimensional force sensor is optimistic about the company's growth. By business, in 2023, the company's structural mechanical performance testing and analysis system business/ structural safety online monitoring and defense equipment PHM system business/ PHM-based intelligent equipment maintenance management platform business/ electrochemical workstation business achieved 222 million yuan/68 million yuan/024 million yuan/58 million yuan respectively; +2.95%/-17.02%/-26.33%/87.41%, respectively. In terms of sensors, the company has optimized and transformed sensor production lines, improved sensor production and supply capacity, and further increased investment in sensor research and development. At the same time, in response to market demand, a large number of new products have been developed. According to the company's annual report, the company's six-component torque sensor has now been developed internally to achieve the parameter goals of (crosstalk: < 2% FS; nonlinearity: < 0.5% FS; lag: < 0.5% FS). The six-axis force sensor can measure force and moment in three orthogonal directions in real time. The sensor is designed based on the principle of strain measurement. It has a built-in low noise amplifier and capture card, and the accuracy is improved through matrix decoupling. It supports communication methods such as RS485, CAN, and industrial Ethernet, and can be applied to fields such as robotics, scientific research, automated inspection, etc., and is optimistic about the application of related products in emerging fields.

Investment suggestions: The company is deeply involved in the field of traditional mechanical testing, while developing self-developed electrochemical workstations to open up the field of new energy; strengthen the research and development of sensors and enter the field of robotics to create new future performance growth points; and the PHM business market potential is high. The company's future performance is expected to grow rapidly and maintain a “buy” rating. The net profit for 2024-2026 is expected to be 157 million yuan, 216 million yuan, 272 million yuan, EPS is 1.14 yuan, 1.56 yuan, respectively. 1.97 yuan, corresponding PE is 35 times, 25 times, and 20 times.

Risk warning: demand falls short of expected risk; risk of uncertainty in technological innovation and new product development; statistical errors, forecast parameters, assumptions, etc. fall short of expected risk