Key points of investment

Short-term performance is under pressure, and the satellite business has high gross profit

In the first half of 2024, the company's revenue was 0.106 billion yuan, -27.56% year-on-year, net profit to mother was -52.047 million yuan, after deducting non-return net profit of -58.817 million yuan. The loss increased over the same period last year. The gross profit margin for the first half of the year was 68.33%, +18.77pct, and management expenses increased 23.52% year over year. Mainly due to the increase in housing depreciation costs, R&D investment remained stable. The first half of the year was 0.123 billion yuan, and various impairment provisions were calculated at about 26.051 million yuan.

In 24Q2, the company's revenue was 38.1472 million yuan, 45.08% YoY, net profit to mother 42.0105 million yuan, YoY -549%, gross margin was 74.09%, +38.33pct YoY, +8.98pct month-on-month. We believe that the company's performance in the first half of the year continued to be affected by the pace of customer demand, and the share of satellite business increased, which led to a rapid increase in the company's gross margin.

Deeply involved in the construction of the Qianfan Constellation. With a cumulative order of 51.13 million yuan, satellite internet has the characteristics of wide coverage, low latency, broadband, and low cost, and can be an effective complement to terrestrial communication. The scale of the satellite Internet industry has continued to expand in the past two years, and the market size of China's satellite Internet industry is expected to exceed 40 billion yuan in 2025. On the afternoon of August 6, the Shanghai Qianfan Constellation completed the launch of Polar Orbit 01 satellites in Taiyuan, marking that China's low-orbit satellite Internet has officially entered the networking stage.

The company's satellite business includes products such as satellite communication payloads, terrestrial communication systems, and in-orbit verification platforms. It has won the bid for the relevant low-orbit satellite constellation ground-based base station and test terminal development project and was successfully delivered; it won the bid for the development of the first phase of the low-orbit satellite constellation satellite communication payload product, and the payload will be delivered in line with the constellation launch plan within the year.

In the first half of the year, the company won a total of 51.1336 million yuan in orders related to Yuanxin Satellite, accounting for 48.14% of revenue.

Defense informatization is a long-term trend. Many of the company's products are expected to give China's military communication systems a lot of room for improvement in technology and investment. For example, US and NATO military satellites are responsible for nearly 85% of military communication traffic, and our military is less than 5%. Compared to developed countries' investment in military communication system construction of up to 5% of national defense spending, China's military communication system construction costs only account for less than 2% of national defense spending.

The company increased the transformation of product results, and new products continued to be launched. In terms of tactical communications, the company's next-generation tactical communication trunk communication equipment completed excellent technical comparison results. In the first half of the year, a total of 3 models of equipment completed certification work. Type 2 equipment was in the certification stage. Small batch production of Type 1 products was completed, supporting construction of several stations was completed, and the remaining 2 models are expected to be installed in small batches within the year; in terms of 5G communication, the company completed the selection of lightweight core networks and terminal modules (type 2), and also selected a list of military model development units; in terms of data links, it has completed the evaluation of certain types of drone on-board data link equipment Test, excellent results, The first supply contract has been signed.

Profit forecasting and valuation

The company is a leader in specialty broadband communications, with a forward-looking layout in the field of satellite communications. Considering the short-term customer order rhythm, we expect the company's net profit for 2024-2026 to be 0.041 billion yuan/0.275 billion/ 0.358 billion yuan, corresponding to a PE of 32X in 25. The company actively creates new satellite growth points and maintains a “buy” rating.

Risk warning

Military broadband market development falls short of expectations; risk of increased market competition; satellite Internet development falls short of expectations