Incident: On the evening of October 28, Beijing time, Shenglu Communications released its 2024 three-quarter report. In Q1-Q3, 2014, it achieved revenue of 0.833 billion yuan, -14.48% year-on-year, and achieved a net profit of 0.066 billion yuan to mother, or -59.34% year-on-year.

Q3 Performance increased year over year, actively seeking business growth points. Looking at a single quarter, Q3 achieved revenue of 0.271 billion yuan, +14.51% year-on-year, and achieved net profit to mother of 0.017 billion yuan, or +10.77% year-on-year, reversing the downward trend in H1's performance. By business, the civil communications business sector company actively participated in the operator's centralized procurement project and successfully won the centralized procurement project for base station antennas and special scene antennas; in terms of terminal antennas, the company has already obtained several projects in the field of autonomous driving and partially achieved mass production and delivery. The microwave electronics business segment company continues to focus on iterative research and development of miniaturized microwave modules and miniaturized microwave subsystems, and continuously innovates technology and products.

Continue to deepen the technological moat and lay out the field of satellite Internet innovation. The company attaches great importance to technology research and development. The R&D investment in Q1-Q3 reached 0.086 billion yuan in 2014, an increase of 4.14% over the previous year, and the R&D expenditure rate was 10.27%, up 1.84 pcts year on year. In the microelectronics business, the company successfully developed a high-performance low phase noise mixed frequency lock-up frequency synthesizer with a wide frequency coverage range (0.5-20 GHz) and 1 MHz step, providing the company with more reliable and efficient products and technical solutions in the field of frequency synthesis; on the basis of 3D micropackaging technology, the company completed the research design of ultra-wideband SIP microwave modules and realized development support for related projects, which helped the company improve the supporting capabilities of the whole machine; in the civil communications business, the company completed the development of large-aperture dual-band dual-band dual-polarized antenna products; satellite internet On the other hand, the company made full use of its technical and resource advantages to carry out research and development related to active phased array antennas in the Ka/Ku band to help develop integrated high-speed networks in the future.

Investment advice: We are optimistic about the company's business layout in the military electronics field and technological expansion in the field of satellite Internet. Short-term disturbances will not affect long-term trends, and are expected to achieve long-term performance growth. The company's net profit for 24-26 is estimated to be 0.107, 0.168, and 0.232 billion yuan, respectively, and the PE corresponding to the closing price on October 31, '24 is 61, 39, and 28 times. Considering that China's defense construction needs are expected to be booming in the future, and the company's technical strength is at the leading level in the industry, we believe that the company has high-quality customer resources and leading brand advantages, and is expected to fully benefit in the future. Maintain a “Recommended” rating.

Risk warning: Downstream customer expansion progress falls short of expectations; military orders fall short of expectations; satellite launch process falls short of expectations.