Core views

2023Q4-2024Q1's revenue growth rate is under pressure, and with the gradual conversion of orders, 2024Q2 is expected to increase its growth rate. With the split business structure, the share of the company's high-end products continues to rise, driving the gross margin level to repeatedly reach new highs. 2024Q1's comprehensive gross margin reached 63.10%; the recovery in business demand in overseas markets will also provide impetus for the company's growth. In the first quarter of 2024, the company successfully released an 8GHz+12bit high-end oscilloscope, which has unique advantages in China, marking a further acceleration of the company's high-end instrument process. The company adheres to the strategy of promoting the full line of the four main products. As investment in R&D increases, more high-end microwave radio frequency instruments are also worth looking forward to.

occurrences

In 2023, the company achieved revenue of 483 million yuan, +21.50% year on year; net profit to mother of 155 million yuan, +10.29% year over year; net profit after deducting non-return to mother of 155 million yuan, +20.06% year on year. In the fourth quarter of 2023, we achieved revenue of 134 million yuan, +2.55% year over year; net profit attributable to mother was 362.395 million yuan, -9.95% year over year; net profit after deducting non-return to mother was 35.213,600 yuan, -3.98% year over year.

With 2024Q1, the company achieved revenue of 104 million yuan, +1.62% year on year; net profit to mother was 33.3743 million yuan, -15.33% year over year; net profit after deducting non-return to mother was 29.6819 million yuan, -15.62% year on year.

Brief review

1. The revenue growth rate has slowed since 2023Q4, and the share of high-end products continued to increase. The company's revenue grew by 21.50% in the full year of 2023. Among them, the growth rate in the fourth quarter was only 2.55%. The growth rate was significantly slower than in the previous three quarters, mainly due to pressure on overall downstream demand. Separating products and markets, the company's high-end products are still rapidly being released, and the growth rate of overseas demand is picking up. 1) By product: In 2023, the revenue of the company's four main products was +22.96% to 391 million yuan, accounting for 82.26% of the main revenue; among them, the revenue of high-end products increased by +55.00%, and the share of high-end products increased by 4pct to 22%, driving the average unit price of the four major product categories to increase by 23.38% year on year. The company's products with a unit price of 30,000 or more had sales +89.91% year-on-year, and products with a unit price of 50,000 or more had sales +157.82% year-on-year. The high-end strategy achieved remarkable results. In 2023, the company's domestic revenue for high-resolution digital oscilloscopes was +68.77%, and domestic RF microwave products were +59.70% year-on-year.

2) By market: The company's overseas revenue in 2023 was +16.80% to 289 million yuan, accounting for 60.72% of the main revenue, accounting for a decrease of 3.19pct compared to 2022. It is mainly due to the continued strength of domestic domestic production substitution policies. The annual domestic revenue growth rate of 33.80% is still ahead of the overseas business growth rate. Judging from marginal changes, the growth rate of overseas revenue in 2023 increased by 2.28 pct year-on-year, reflecting the company's continued accumulation of overseas channels and brands, showing an upward trend in demand.

3) Channel division: In 2023, the company's distribution revenue was +22.60% to 373 million yuan, accounting for 78.34% of the main revenue; direct sales revenue was +65.54% to 629,182 million yuan, maintaining a high growth rate of more than 50% for 3 consecutive years, accounting for a year-on-year increase of 3.40 pct to 13.22%; the increase in the proportion of direct sales complements the company's high-end product strategy. High value-added products have higher sales prices and complex functions, and expanding direct sales channels is both economical and necessary.

In 2023, the company's ODM revenue was -10.79% year-on-year to 40.1483 million yuan. The share gradually declined, and the company's own brand advantage gradually became prominent.

2024Q1's revenue growth rate declined further to 1.62%, mainly due to the short-term impact of delays in revenue recognition. According to the company's disclosure, orders for 2024Q1 that have been shipped but have not confirmed revenue are equivalent to 12.5546 million yuan. If revenue can be confirmed, the 2024Q1 revenue growth rate will increase to 13.90% year-on-year.

With the smooth conversion of some of the company's orders in 2024Q2, the growth rate is expected to recover.

2. The comprehensive gross margin has repeatedly reached new highs. The 2024Q1 R&D expenses rate gradually increased to 20%. The company's comprehensive gross margin increased by 3.76 pct to 61.30% year on year in 2023. Among them, the gross margin of the four main products increased 4.47 pct to 64.05% year on year, all reaching record highs for the same period in history. The company's gross margin has repeatedly reached new highs in recent years, mainly benefiting from the high-end iteration of the company's products; in 2023, the company's direct sales gross margin increased by 3.46 pct to 67.39% year-on-year, and the increase in the share of direct sales revenue also contributed marginally to the increase in overall gross margin. The company's expense ratio for the 2023 period was +7.39pct to 28.55%. Among them, sales, management, R&D, and finance expenses were +1.07pct, +0.30pct, +3.33pct, +2.69pct to 15.50%, 4.26%, 17.82%, and -9.02%, respectively. Currently, the company has plenty of cash on its books and continues to contribute a lot of interest income to the company. The company's net profit margin in 2023 was -3.27pct year-on-year to 32.13%.

2024Q1's comprehensive gross margin increased by 3.93 pct to 63.10% year on year, setting a record high in gross margin in a single quarter; sales of products with a unit price of 30,000 or more were +32.91% year-on-year, and sales of products with a unit price of 50,000 or more were +74.24% year-on-year. The cost rate during the 2024Q1 period was +6.85pct to 33.57%, of which the R&D cost rate was +3.66pct to 20.07% year over year. The company launched major new products such as 8GHz oscilloscopes in the first quarter, raising the R&D cost rate to a high level. As products are gradually released, the R&D cost rate will gradually be diluted. The net interest rate of the 2024Q1 company was -5.85pct to 29.25% year on year. With the gradual release of the company's business scale throughout the year, there is some room for recovery.

3. The iteration of new products has accelerated. The 8GHz+12bit high-end oscilloscope has been successfully released. The company has continued to accelerate the iteration of new products in recent years, releasing 6, 3, 8, and 7 new products respectively in 2020-2023. 2024Q1 successfully released the SDS7000A series of 8 GHz bandwidth, 12-bit high-resolution digital oscilloscopes and the SDM4000A series of high-speed six and a half digital multimeters.

The blockbuster 8GHz+12bit oscilloscope can balance high bandwidth and high resolution, and has unique advantages in China, marking a further acceleration of the company's high-end instrument process. With the release of 4GHz and 8GHz high-bandwidth oscilloscopes and SDS800X HD high-resolution oscilloscopes, it will add new momentum to the company's overall business. The company adheres to the strategy of promoting the full line of the four main products, and has continued to increase investment in R&D in recent years. Future higher-frequency RF microwave instruments are also worth looking forward to.

Investment advice: We expect the company to achieve revenue of 597, 7.30, and 892 million yuan respectively in 2024-2026, and net profit to mother of 1.95, 2.37, and 290 million yuan, respectively, +25.33%, +21.79%, and +22.24%, respectively. Corresponding to the 2024-2026 dynamic PE, 27.69, 22.74, and 18.60 times, respectively, to maintain the “buy” rating.