Incident: The company released its 2024 mid-year report. In the first half of 2024, revenue was 1.303 billion yuan, a year-on-year decrease of 32.21%, and net profit to mother was 0.245 billion yuan, a year-on-year decrease of 20.77%.

Key points of investment

External competitive pressure is intense, and operating performance is under pressure: the company achieved revenue of 1.303 billion yuan in the first half of 2024, a year-on-year decrease of 32.21%, and realized net profit to mother of 0.245 billion yuan, a decrease of 20.77% over the previous year.

Mainly due to increased pressure from the competitive environment in the market and a decrease in the company's T/R module and RF module revenue in the first half of the year. Among them, the company's total revenue for the second quarter was 0.609 billion yuan, a year-on-year decrease of 50.21%. Facing the fierce competitive environment in the market, the company is still guided by national strategies and market demand, always focusing on main business development and core technological innovation, and continuing to promote technological innovation.

New technology continues to be addressed, and various products have begun to be delivered: the company actively plays the main role in innovation and continues to deepen and promote technological innovation cooperation with upstream and downstream enterprises, universities and institutions in the industrial chain. In the first half of 2024, the company invested 0.18 billion yuan in R&D, an increase of 0.49% over the same period last year, accounting for 13.81% of revenue. In the first half of the year, the company invested 0.062 billion yuan in millimeter-wave core technology research projects based on domestic semiconductor processes, and introduced some of the technologies into products and began mass production. It is expected that the company will achieve a nationwide production supply chain for the company's main chip products and promote the improvement of semiconductor process performance and quality.

The downstream market has high recognition and broad future development prospects: the company is committed to the R&D, production and sales of a series of products in the field of active phased array T/R components and RF integrated circuits, and has formed related core technologies. Its products have been recognized by the market, and it has also established a good corporate image and cooperative relationship with downstream units. The company has carried out technology research and product development work in the fields of low-orbit satellites and commercial space, and has begun delivering various T/R component products to customers. At the same time, the company's RF integrated circuits and component products have been supplied in large quantities in the domestic 4G and 5G mobile communication fields, and switches, antenna tuners, and DiFEM-related chip products for terminal applications have been introduced by customers and delivered in batches. New fields and new customers are actively promoting the development and promotion of ODU and satellite communication chips. Some products have already entered the customer certification stage, and there is broad scope for future market development.

Profit forecast and investment rating: In addition to revenue pressure, the company is generally in line with expectations. Considering that the company is one of the few leading domestic companies that can supply active phased array T/R components and serialized RF integrated circuit products in batches, we lowered the company's net profit forecast for 2024 to 0.567 billion yuan, the previous value was 0.945 billion yuan, and the net profit forecast for 2025-2026 was 0.736/0.962 billion yuan, respectively. The corresponding PE was 40/31/24 times, respectively, covered for the first time , giving it a “buy” rating.

Risk warning: 1) the risk of new product development; 2) the risk of losing core technology; 3) the risk of losing core technical personnel; 4) the risk of increased market competition.