Matters:

On October 29, Shanghai Hanxun released the “Report for the Third Quarter of 2024”. 2024Q1-3's revenue was 0.176 billion yuan, down 18.38% year on year, and net profit to mother was -0.091 billion yuan, down 45.37% year on year.

Commentary:

2024Q3's revenue and performance have picked up. 2024Q1-3 achieved operating income of 0.176 billion yuan, a year-on-year decrease of 18.38%, gross margin of 60.98%, a year-on-year increase of 17.11 percentage points, and realized net profit to mother of -0.091 billion yuan, a year-on-year decrease of 45.37%. The company's revenue for the third quarter was 0.07 billion yuan, up 1.02% year on year and up 83.87% month on month. Net profit to mother was -0.039 billion yuan, up 18.32% year on year and 6.58% month on month. The company's revenue and performance declined or was mainly due to fluctuations in military order purchases.

The company increased investment in R&D, and short-term depreciation and cost pressure increased. 2024Q1-3 accrued asset impairment losses of 8.053 million yuan and calculated credit impairment losses of 47.368 million yuan, accounting for 4.6%/26.9% of current revenue, respectively. The accrued amount and ratio increased compared to the same period last year, causing a certain drag on the company's performance. Among them, the increase in credit impairment losses was mainly due to an increase in bad debt preparation for accounts receivable, while the increase in asset impairment losses was mainly due to an increase in inventory depreciation losses. Furthermore, in 2024Q1-3, the company's R&D expenses reached 0.16 billion yuan, accounting for 90.87% of current revenue. The company focuses on research on key broadband mobile communication technologies. As of 2024H1, it has 55 core patents, 114 software copyrights, independent and controllable core intellectual property rights, and rapid customized R&D capabilities. With further investment on the R&D side, the company is expected to further consolidate its dominant position, and profits can be expected to be released.

The second batch of 18 G60 satellites was successfully launched, and the number of satellites in orbit in the Thousand Sails constellation increased to 36, and the company's performance may be accelerated. In August/October, the first/second batch of satellites in China's G60 constellation was successfully launched into orbit. Both launches were in the form of an arrow of 18 stars. Currently, the number of satellites in orbit in the Thousand Sails constellation has increased to 36. Judging from the launch plan, the “Thousand Sails Constellation” is being built in three stages. The first stage is to achieve 648 stars to provide regional network coverage by the end of 2025; in the second phase, by the end of 2027, the second batch of 648 stars will provide global network coverage; and by the end of 2030, 15,000 stars will provide direct mobile phone multi-service integration services. At present, the construction side, launch side, and participants in China's low-orbit satellite networking have all made relatively rapid progress, and the integrity of the industrial chain has been further improved. It is expected that Q4 will enter an intensive launch period. In the field of satellite business, the company's products include satellite communication payloads, terrestrial communication systems and in-orbit verification platforms. The company has successfully won the bid and successfully delivered the relevant low-orbit satellite constellation ground-based base station and test terminal development project; it won the bid for the first phase of the low-orbit satellite constellation satellite communication payload product development. The payload is expected to be put into operation in 2024, and delivery is achieved in line with the 2024 launch plan of the relevant constellation. The company is a supplier of Yuanxin and has a deep cooperative relationship with it. It is expected that the company's performance will be further accelerated or the implementation will be accelerated as the low-orbit satellite networking process progresses.

Investment advice: Affected by the release of downstream customer demand falling short of expectations, we lowered our profit forecast. We expect the company's 2024-2026 operating income to be 0.34, 0.987, and 1.328 billion yuan, and net profit to mother of -0.069, 0.283, 0.383 billion yuan (the previous value of net profit to mother in 2024-2026 was 0.043, 0.262, 0.375 billion yuan). The corresponding EPS is -0.11, 0.45, and 0.61 billion yuan, maintaining the “recommended” rating .

Risk warning: Technological innovation R&D investment risk, product technology iteration, increased market competition, foreign investment in new business falls short of expectations.