Incident: The company released the 2023 annual report and the first quarter report of 2024. In 2023, the company achieved revenue of 3,592 billion yuan, -16.31% year on year, net profit to mother of 309 million yuan, or -47.23% year on year; net profit after deducting non-return to mother was 239 million yuan, or -53.97% year over year. The first quarter of 2024 achieved revenue of 358 million yuan, -17.97% year on year, net profit to mother of 0.04 billion yuan, -74.85% year on year; net profit after deducting non-return to mother -01 million yuan, -117.20% year on year.
Short-term performance is under pressure, and long-term hydroacoustic electronic defense products are improving. By product, in 2023, the company's hydroacoustic electronic defense products achieved revenue of 1.03 billion yuan, +3.34%, gross profit margin of 32.58%, year-on-year -6.66pct; specialty electronic products achieved revenue of 989 million yuan, y-1.09%, gross profit margin of 40.86%, year-on-year +5.83pct; electronic information products achieved revenue of 1,243 billion yuan, -19.66%, gross profit margin of 22.55%, year-on-year +1.62 pct; professional technical services and others achieved revenue of 0.29 million yuan, year-on-year + 31.06%, gross profit margin of 21.57%, year-on-year -5.07pct; the company's overall operation has experienced great pressure and challenges due to factors such as market demand and price fluctuations for some products, adjustments to some product plans, and increased industry competition. However, as the company's leading domestic hydroacoustic electronic equipment, sector revenue continues to grow, compounded by rising downstream potential demand for hydroacoustic equipment, and the future development of the company's hydroacoustic electronic defense products can be expected.
Costs decrease with the product delivery cycle. According to the company's 2024 quarterly report, sales expenses were 0.26 million yuan, -7.76% year on year; management expenses were 68 million yuan, -4.11% year on year; R&D expenses were 58 million yuan, -10.42% year on year. The main cost decline was mainly due to adjustments in the company's product plans.
Focus on platform construction to help maritime powers. The implementation of China's maritime power strategy has been accelerated. In terms of hydroacoustic electronics, the company broke through key technologies in multiple directions, and some products competed for first place in multiple categories. The business aspect mainly focused on platform construction needs, grasped opportunities for related product placement and replacement, and continued to maintain an advantageous position. Some hydroacoustic electronics subsidiaries saw a significant increase in the amount of new contracts received during the reporting period.
Investment advice: The company's net profit for 24/25/26 is estimated to be 548/6.35/743 million yuan YoY +77.7%/+15.8%/+16.9%. Maintain an “Overweight” rating.
Risk warning: Increased industry competition; fluctuations in the upstream and downstream electronic information industry chains; high customer concentration.