Incident: The company released its 2023 annual report and 24Q1 results, achieving revenue of 480 million yuan, +21.5% year on year; net profit of 160 million yuan, +10.3% year over year; single 23Q4 achieved revenue of 130 million, +2.6% year on year; net profit to mother of 36 million, -10.0% year on year; 24Q1 achieved revenue of 100 million yuan, +1.6% year on year; net profit to mother of 0.3 million, -15.3% year on year. Promote the strategy of high-end products, and continue to increase gross margin.

Further promote the strategy of high-end products. The sharp rise in the volume and price of high-end products led to an increase in the company's overall gross margin; the management cost ratio increased during the period due to the effects of increased R&D investment, interest income, and a reduction in one-time government subsidies.

In 2023, the company's high-end product strategy continued to advance. The overall gross margin was 61.3%, +3.76pp. The increase in gross margin was mainly due to the sharp rise in the price of the company's high-end products, which continued to maintain a good momentum of rapid growth. The share of high-end products increased to 22%, +4pp, driving the average unit price of the four categories of products to increase 23.4% year on year; the net interest rate was 32.1%, -3.27pp; the cost ratio for the period was 38.6%, +7.39pp, year on year. +0.30pp, +3.33pp, and +2.69pp are mainly due to a continuous increase in investment in R&D and sales, and a decrease in interest income. Looking at 24Q1, the company's gross margin was 63.1%, +3.93pp, and the net interest rate was 29.3%, and -5.85pp; the period expense ratio was 33.6%, +6.85pp. Looking at the breakdown, sales, management, R&D, and financial expense ratios were +1.46pp, -1.07pp, +3.66pp, and +2.79pp, respectively, mainly due to 24Q1 company's one-time reduction in subsidies, increase in R&D investment, exchange rate fluctuations, etc.

Large orders are awaiting confirmation of revenue, and 24Q1's revenue is under pressure; independent brand business advantages are highlighted, product structure continues to be optimized, and the company's competitiveness is improving. In 24Q1, the company's revenue increased 2.6% year on year, slightly lower than expected. Considering that Q1 company's orders that have been shipped but have not confirmed revenue, the revenue growth rate will increase to 13.9% year over year in the reporting period if revenue can be confirmed. In 24Q1, the company gave the company's own brand “SIGLENT” revenue +5.6% year over year, showing a relatively better growth trend; judging from the unit sales price of products, products with a sales unit price of 30,000 or more had sales +32.9%, and products with a sales unit price of 50,000 or more had sales +74.2% year-on-year. High-end products grew significantly, driving the company's profitability to continue to improve.

The company is a technology-leading general electronic testing and measuring instrument company in China. The domestic market benefits from domestic substitution and maintains high growth, demand in overseas markets has steadily rebounded, and long-term growth momentum is sufficient. At present, relevant national policies have repeatedly emphasized the need to fight the battle to localize scientific instruments. Overseas market demand is expected to rise steadily, and there is plenty of room for development; in 2023, the company's domestic market achieved revenue of 190 million yuan, +33.8% year over year, gross margin decreased by 0.72pp to 62.2%, and the overseas market achieved revenue of 290 million yuan, +16.8% year on year, and gross margin increased 7.01pp to 61.5%. The company is one of the few general electronic test and measurement instrument manufacturers in the world that also has the four main products of digital oscilloscopes, waveform and signal generators, spectrum analyzers, and vector network analyzers. It has also entered the high-end field. Product competitiveness is constantly improving, and the company continues to strengthen the management and construction of direct sales teams and sales promotion for typical major customers and high-end products in various industries. Looking ahead, it is expected to deeply help and benefit from domestic alternatives and overseas market development.

Profit forecasting and investment advice. The company's net profit from 2024-2026 is estimated to be 1.8, 230 million yuan, and 280 million yuan, respectively. The compound net profit growth rate for the next three years is 22%, maintaining a “holding” rating.

Risk warning: risk of technology and product development, risk of tight chip supply, risk of international trade friction.