Core views
Incident: The company released its annual report for the year 23 and the quarterly report for '24, and achieved revenue of 3.82 billion yuan (YOY +1.77%), net profit of 599 million yuan (YOY +9.10%), gross profit margin of 34.71% (YOY+4.47pps), and a net profit margin of 18.42% (YOY+1.27pps) in '23. 24Q1 achieved revenue of 562 million yuan (YOY -1.82%), net profit to mother of 116 million yuan (YOY +2.70%), gross profit margin 36.72% (YOY+1.51pps), and a net profit margin of 20.60% (YOY+1.00pps).
Comment: Due to product restructuring and improving profit side growth in cost reduction and efficiency, the low-altitude layout can be expected.
The company's profit growth trend improved in '23, mainly due to product structure/cost control/operational efficiency optimization, and main business costs decreased 4.77% year on year. By business, revenue from radar equipment/industrial software and intelligent manufacturing/smart rail delivery increased 4.9%/-0.3%/-7.68% year on year, respectively, and gross margin increased 5.94/-0.48/0.62 pps to 39.46%/37.45%/11.47%. Among them, radar business project delivery was good, and deep integration of resources achieved collaboration and improved profitability; several key projects in the industrial software business were delivered and accepted; several smart rail transit projects entered the final stage, and the construction time for new construction projects was relatively short, and revenue declined. In terms of subsidiaries, Guorui Defense/Guorui Xinwei/Enrite's net profit in '23 was 487/0.68/0.30 billion yuan respectively, up 14.75%/-2.49%/6.80% year-on-year respectively. On the cost side, the large increase in sales expenses may indicate that the company is actively exploring the market. The expense ratio was 12.04% (YOY +1.15%) over the 23-year period, and sales expenses increased 17.69% year over year. According to the April 25 Investor Relations Record Form disclosed by the company, the company is laid out around the two main lines of low-altitude safety and equipment manufacturing, and has the ability to provide equipment and services such as weather support, low-altitude surveillance, flight applications, and intelligent manufacturing.
Profit forecast and investment suggestions: Optimistic about the company's positioning of electronic equipment and Internet communication systems. Radar will benefit from defense informatization and the military trade boom, and the continuous development of industrial software/smart rail transit. The company's EPS is expected to be 0.58/0.70/0.85 yuan/share in 24-26 years, respectively. Referring to comparable companies, a PE valuation of 30 times over 24 years, corresponding to a reasonable value of 17.32 yuan/share, maintaining a “gain” rating.
Risk warning: changes in the international situation; falling short of expectations; intensification of market competition, etc.