Incidents:

The company released a report for the third quarter of 2024: the company achieved revenue of 0.346 billion yuan in 2024Q1-Q3, a year-on-year decrease of 18.44%; realized net profit to mother -0.006 billion yuan, a year-on-year decrease of 133.21%. The company achieved revenue of 0.09 billion yuan in a single quarter of 2024Q3, a year-on-year decrease of 43.00%; net profit to mother was -0.008 billion yuan, a year-on-year decrease of 206.06%.

Comment:

There was a slight increase in gross margin, and the increase in expense ratio+a decrease in investment income during the period put pressure on the company's profits.

On the gross profit side, the company's gross margin for 2024Q1-Q3 was 28.97%, +2.03pct year-on-year, a slight increase. On the cost side, the company's 2024Q1-Q3 sales/management/R&D/finance rate was 13.88%/9.41%/8.33%/-1.89%, a year-on-year change of +2.16/+1.30/+0.25/+0.35pct. The total cost rate for the period was 29.73%, +4.05pct year-on-year. On the profit side, the company's 2024Q1-Q3 net interest rate was -1.84%, -6.35pct year-on-year, mainly due to an increase in expenses and a decrease in investment income during the period. The 2024Q1-Q3 investment income was 1.28 million yuan, or 11.29 million yuan for the same period in 2023, a year-on-year decrease of 10.01 million yuan, mainly due to confirmed investment losses in Xingsi Semiconductor.

The company is a high-tech enterprise in the field of instrumentation. The company has accumulated more than 50 years of scientific research and production experience in the fields of optics, electronics and information technology, precision machinery manufacturing, etc., and is one of the enterprises with strong independent innovation capabilities in China's instrumentation industry. The company is a high-tech enterprise integrating design, R&D, manufacturing, sales and service. It is mainly engaged in high-end analytical measuring instrument manufacturing, software development, system integration, operation and maintenance, and data analysis services. The products and services are mainly used in the fields of environmental monitoring, smart transportation, and meteorological observation.

Purchase a portion of the shares in Xingsi Semiconductor to lay out the domestic baseband chip field. On September 13, 2024, the company signed the “Equity Transfer Agreement on Shanghai Xingsi Semiconductor Co., Ltd.” with Zhuhai Luoheng through Blue Core Partners controlled by the company. Blue Core Partners transferred 3.4783% of the shares in Xingsi Semiconductor at a price of 80 million yuan. Previously, Anhui Lanxin Information, a wholly-owned subsidiary of the company, acquired 5.0935% of the shares in Xingsi Semiconductor on May 10, 2024. Currently, the company holds a total of 8.57% of the shares in Xingsi Semiconductor. Starbucks Semiconductor focuses on 5G/6G communication technology to provide all-scene integrated space-ground baseband chips. Some of the chips or modules developed and produced by Xingsi Semiconductor have been distributed and are in the commercial promotion stage, and are in the testing, verification and introduction stage for relevant satellite operators and major mobile phone manufacturer customers. Starbucks Semiconductor has now received official orders from some important customers and shipped in small batches. It is expected that large-scale commercial use of chips will be achieved in 2025.

Investment advice: We expect the company to achieve revenue of 0.626/0.702/0.789 billion yuan in 2024-2026, net profit to mother of -0.001/0.034/0.064 billion yuan, corresponding EPS of -0.01/0.18/0.35 yuan, and PE of -/192.34/101.76X. Covered for the first time, a “gain” rating was given.

Risk warning: Demand is declining, competition is intensifying, and performance and valuation judgments fall short of expectations.