Event: The company released its 2023 annual report and 2024 quarterly report. In '23, it achieved revenue of 162 million yuan (+8.25%), and net profit to mother of -39 million yuan. 24Q1 revenue of 0.33 billion yuan (+18.08%), net profit attributable to mother - $0.05 billion.

Annual revenue increased 8.25% year over year, and gross margin rebounded, but expense ratios and impairment losses increased. By business, the company's simulation business revenue in '23 was 86.72 million yuan (-5.15%), and gross margin rebounded to 42.89% (+28.07pct); guidance business revenue was 18.33 million yuan (-49.30%), gross profit margin 27.69% (-39.89pct); revenue from civilian products was 44.28 million yuan (+91.59%), gross profit margin 22.82% (-8.27pct); revenue from laser countervailing systems was 1.09 million yuan, gross profit margin 5.96%; test equipment revenue was 5.96%; test equipment revenue was 2.89%. The company's consolidated gross margin increased 9.04pct to 35.17% in '23. In '23, the company continued to increase R&D investment in its main business areas, while accrued credit impairment losses increased year-on-year due to the increase in the age of individual customers, affecting profit-side performance in '23.

Huizhou Ruiguang's consolidation led to a significant increase in fixed assets. At the end of 23, the company's fixed assets were 210 million yuan, an increase of 110.59% over the same period last year, mainly due to the transfer of fixed assets from the subsidiary Huizhou Ruiguang's ongoing construction project. 23. The contract debt of 62 million yuan at the end of the year increased by 29.73% over the same period last year, indicating that the company's order situation was good.

The efficiency of technological transformation has improved, market development results have been shown, and the civilian goods sector has developed steadily. In 2023, the company actively developed and improved product production efficiency, while increasing customer development and product promotion efforts, and the results of market development were evident.

During the reporting period: 1) The company's key models, the infrared image scanning detection device based on the** platform, completed the delivery of multiple product sets at the model stage through technical research by the project team. The models involved in the research are of great strategic significance; the low-cost dual-light detection modules are multi-caliber products, which have entered the small-batch stage one after another, and are expected to be supported in large quantities in the future. 2) In the direction of simulation, multiple projects have been delivered, and a large amount of preliminary solution verification work has been completed, laying a solid foundation for seeking projects in 2024; quickly providing simulation equipment in response to the requirements of an overall unit, providing strong support for customer development and testing; and carrying out special technical work such as making composite simulators lightweight and miniaturizing and improving the performance of long-wave infrared simulators in line with requirements. 3) The delivery of laser barrier removal projects in the civilian sector has been realized, and products such as low-power light and compact laser countermeasure systems have been quickly launched, seizing the opportunity period when demand for anti-drone equipment is developing.

Taking into account that the revenue from the guidance and simulation business fell short of expectations and the increase in cost rates, the EPS for 24 and 25 was adjusted to 0.19 yuan and 0.58 yuan (originally 0.66 and 1.14 yuan), and the additional EPS for 26 years was 0.80 yuan. Considering that the net profit scale after 25 years can better reflect the operating situation, refer to the company's 25-year valuation level, and at the same time give a 25% valuation premium based on the company's rapid growth rate, corresponding to 30 times PE, and a target price of 17.4 yuan, to give an increase in holdings rating.

Risk warning

Guidance orders fall short of expectations; performance falls short of expectations or has a negative impact on valuation