Incident: On the evening of October 30, Beijing time, Zhenyou Technology released its 2024 three-quarter report. In Q1-Q3 of '24, it achieved operating income of 0.577 billion yuan, an increase of 11.43% over the previous year, achieved a net profit of 0.017 billion yuan to mother, and successfully turned a loss into a profit.

The company's revenue and profit both increased. Looking at a single quarter, the company achieved revenue of 0.201 billion yuan in Q24, an increase of 3.53% over the previous year, and realized net profit of 8.88 million yuan to mother, an increase of 206.33% over the previous year. The increase in the company's profitability was mainly due to the company's continued cost control and fee reduction. Expenses declined year-on-year during the period, while disposal of holding subsidiaries during the reporting period increased investment income.

The signing of large new satellite orders helped the company grow, and the company is in a leading position in the satellite Internet field. The company is one of the few companies that can provide 5G core networks for satellites, including high-orbit satellites and low-orbit satellite core networks. Satellite communication, especially low-orbit satellite communication, is cutting-edge technology. Currently, only a few companies in the industry can master this technology and successfully commercialize it. The company continues to improve technology and product capabilities related to the satellite Internet core network, and has completed the research and development of satellite satellite satellite core network UPF software and the development of satellite access network network management software. The company announced on the evening of March 1 that it has obtained an equipment and service project contract for a satellite communication project in a certain country, with a total contract amount of 0.112 billion US dollars (excluding tax); in addition, it has also won bids for several satellite Internet core network projects and projects related to the direct mobile phone connection satellite business; it will continue to expand core network-related businesses around 5G+ satellites, such as the Beidou satellite image voice multimedia communication project.

With the launch of satellite networking, the industry is expected to enter a golden stage of development. On August 6 and October 15, Beijing time, the first batch and second batch of connected satellites of the Qianfan constellation were successfully launched one after another. This time, the Qianfan constellation is the first batch of low-orbit communication satellites successfully launched by China. It marks the beginning of China's constellation networking and the official opening of the first year of commercial space. Currently, China has three “Ten Thousand Star Constellation” plans: the “GW Constellation” is led by China Star Network and plans to build a constellation composed of 0.013 million satellites; the “Thousand Sails Constellation” will jointly build a satellite Internet industry cluster with nine major cities in the Yangtze River Delta, including Shanghai, which is expected to achieve 0.015 million satellites to provide multi-service integration services by the end of 2030; according to advance information documents submitted by Shanghai Lanjian Hongqing Technology Co., Ltd. to ITU, the “Honghu-3” constellation is planned to launch a total of 0.01 on 160 orbital planes million satellites. Following the successful launch of satellite Internet high-orbit satellites 01 and 02 on February 29 and August 1, '24, the high-orbiting satellite 03 aboard the Long March 3B carrier rocket was successfully launched at the Xichang Satellite Launch Center on October 10, '24, laying an important foundation for China to build a global Internet.

Investment suggestions: Considering the sharp increase in demand for core network and access network equipment from domestic and overseas operators, and the elasticity of the company's core network equipment demand under the low orbit satellite network construction requirements at home and abroad, we expect the company's net profit to be 0.025 billion yuan, 0.084 billion yuan, and 0.119 billion yuan respectively in 2024-2026. The PE corresponding to the current stock price is 180X, 54X, and 38X, respectively. It has strong growth potential in the future, is optimistic about the company's subsequent development, and maintains a “recommended” rating.

Risk warning: Downstream customer development progress falls short of expectations; new product development falls short of expectations.