Core views:

Event: The company announced its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved revenue, net profit attributable to mother, and net profit excluding non-return to mother of 35.67 billion yuan, 6.06 billion yuan, and 571 million yuan respectively, with year-on-year increases of 3.08%, 16.47%, and 13.94%, respectively. In the first quarter of 2024, the company achieved revenue, net profit attributable to mother, and net profit of 6.93, 1.21, and 118 million yuan respectively, with year-on-year changes of -0.62%, +4.22%, and +14.32%, respectively.

Comment: The company achieved steady growth for the full year of 23 and 24Q1. We are optimistic that the company will benefit from the modernization of equipment and the development potential of new categories in the downstream terminal market. On the revenue side, the company achieved a revenue growth rate of 3.08% in 2023. The main reason was that the company actively carried out technology research and development and market development to steadily ensure product production and supply chain safety. By product, in 2023, TR components, RF modules, and RF chips achieved revenue of 33.79 million yuan and 128 million yuan respectively, with year-on-year changes of +7.64% and -52.98%, respectively. Net profit to mother grew faster than revenue in '23, mainly due to improved product structure and a 1.61 percentage point increase in gross margin to 32.28%. On the balance sheet side, the book value of the company's inventory and fixed assets at the end of 23 was 6.17 billion yuan and 1,354 billion yuan, respectively, with year-on-year changes of -35.43% and +108.40%, respectively. This is mainly due to the acceleration of the entire inventory management process and the acceleration of the RF integrated circuit industrialization project during the reporting period. According to the company's announcement, in 2024, the company expects to purchase raw materials from other affiliated units of China Telecom at 1,010 million yuan, and the actual amount generated in 23 will be 817 million yuan, an increase of about 24% over the previous year, mainly due to the increase in production and operation needs. Equipment-related business requirements are highly planned, and we are optimistic about the company's potential for steady growth over 24 years.

Profit forecast and investment advice: Expected 24-26 results are 1.67/2.10/2.69 yuan/share, respectively.

Taking into account the scale and technical advantages of the company's T/R components for high-end domestic equipment and the expansion prospects of the civilian downstream terminal market, we maintained a reasonable value of 91.51 yuan/share, corresponding to 55 times PE in 24 years, maintaining a “gain” rating.

Risk warning: capacity construction falls short of expectations; equipment delivery expectations are low; risk of policy adjustments, etc.