Company profile: The company is a leading air defense warning radar development enterprise in China. It is backed by the Beijing Radio Institute of the Aerospace Science and Industry Group. Since its establishment, it has been engaged in the development of air defense warning radars, accumulated rich research results and production experience, and formed a complete R&D, procurement, production and sales system.

According to the company's 2023 annual report, the company's air defense warning radar products have become the main equipment in the field of air defense warning in China, and are expected to benefit from the development of informatization and the expansion of emerging markets such as military trade and the low-altitude economy.

Core investment logic: (1) Leading domestic air defense warning radar R&D and manufacturing enterprise: The company's shareholder is the Beijing Radio Measurement Research Institute, which is the backbone research institute engaged in radar development in China. According to the company's 2023 annual report, after years of technology accumulation, the company has mastered 7 types of core technologies, including phased array radar overall design and adaptive anti-interference, and its technical strength is in a leading position in China. (2) Demand side: Benefit from the development of informatization and the expansion of emerging markets such as military trade and the low-altitude economy. Air defense warning radar is the core equipment for electronic warfare and information warfare. The demand side is expected to fully benefit from China's military informatization and equipment construction; at the same time, along with the continuous deepening of national defense informatization processes, the global detection equipment export transaction volume remains at a high level. According to the company's 2023 annual report, the company's military trade orders achieved sales revenue of 110 million yuan in 2023. (3) Pattern side:

There are high technical barriers to the development of complete military radar machines in China, and they are characterized by the integration of scientific research and production. Currently, only a few military units or enterprises are engaged in the development of complete military radar machines. According to the company's prospectus, the company's bid rate for related projects in 2020-22 reached 64%, and it has a strong competitive advantage in the industry.

Profit forecast and investment advice: The company's EPS is expected to be 0.42/0.56/0.63 yuan/share in 24-26, respectively. Combined with comparable company valuations, considering that the company's air defense warning radar products are scarce in China, and that the military trade market and civilian market provide strong growth for the company's product demand, we think it is appropriate to give the company a 24-year PE valuation of 55 times, corresponding to a reasonable value of 23.12 yuan/share, and give it an “increase in holdings” rating.

Risk warning: risk of technology upgrading and substitution, risk of R&D investment falling short of expectations, risk of market competition intensifying, risk of expanding the consumer goods market