Event: the company released its quarterly report for 2023 on October 23. 1~3Q23 realized revenue of 2.662 billion yuan, YoY + 55.7%; net profit of 387 million yuan, YoY + 112.1%; deduction of non-net profit of 344 million yuan, YoY + 115.9%. The performance was better than the market had expected. The company has formed a new pattern of infrared-based, microwave, laser and other multi-dimensional sensing fields to gradually break through, supporting the company's sustained and rapid development.
3Q23's profit increased by 85%; profitability improved. 1) in a single quarter, 3Q23 achieved revenue of 878 million yuan, YoY + 40.9%; net profit of 129 million yuan, YoY + 84.9%; deduction of non-net profit of 115 million yuan, YoY + 90.7%. 4Q22, some of the company's delayed existing special equipment projects entered mass delivery and demand continued to 2023, 1Q23~3Q23 performance continued to be good. 2) profitability: 3Q23 gross profit margin increased by 4.6ppt to 51.5% compared with the same period last year, and net profit margin increased by 2.1ppt to 13.4% year-on-year. 1~3Q23 gross profit margin increased by 3.3ppt to 50.4% year-on-year; net profit margin increased by 2.8ppt to 13.4% year-on-year. The company has strengthened the control of the cost side, and the comprehensive profitability has been improved.
The ability of cost control has been improved, and the cost of research and development has increased by 25%. During the 1~3Q23 period, the expense rate decreased from 1.3ppt to 34.0% compared with the same period last year. 1) the sales expense rate decreased from 0.6ppt to 5.1%; 2) the management expense rate increased from 1.7ppt to 10.5%; 3) the financial expense rate was 1.1%, compared with-0.8% in the same period last year. 4) the R & D expense rate decreased from 4.2ppt to 17.4% year-on-year; R & D expenses increased by 25.2% to 462 million yuan compared with the same period last year. By the end of 3Q23, the company: 1) accounts receivable and bills 1.502 billion yuan, an increase of 8.4% over the end of 2Q23; 2) prepayments of 122 million yuan, an increase of 14.1% over the end of 2Q23; 3) inventory of 1.672 billion yuan, an increase of 2.0% over the end of 2Q23; 4) a contract liability of 114 million yuan, a decrease of 19.1% compared with the end of 2Q23. The net cash flow of 1~3Q23 's operating activities was 145 million yuan, compared with 129 million yuan in the same period last year.
Set up Ruiswei; build the underlying core competence of microwave semiconductors. The company announced on August 7 that in order to promote the development in the field of microwave semiconductors and radio frequency electronic systems, the company and Yantai Longitudinal Core plan to jointly invest 10 million yuan to set up Ruiswei, of which the company contributed 6 million yuan and Yantai Longitudinal Core contributed 4 million yuan. The microwave field is the basic technology and industrial direction of the company's multi-dimensional sensing technology. The company cuts into the microwave field with Thammer R components, phased array subsystems and radar, and continues to build core competitiveness in the underlying microwave semiconductors. The initial technical team has mastered monolithic microwave integrated circuit (MMIC) chips, microwave components, phased array antennas, radar equipment and other technology. after corporate operation, it will further improve the technical team, dig deep into the core technology, and carry out business R & D and industrialization of microwave semiconductor and RF electronic systems based on common technology.
Investment suggestion: the company is a special new "little giant" at the national level, with the layout of the whole infrared industry chain, realizing business category expansion in the microwave field by holding Wuxi Huashan in 2021, and implementing two phases of equity incentives in 2020 and 2022. Demonstrate long-term development confidence. Considering the improvement of the company's downstream demand and its expansion in the field of precision guidance, we estimate that the company's net profit from 2023 to 2025 will be 524 million yuan, 772 million yuan and 1.012 billion yuan, respectively, and the current stock price will be 37x/25x/19x for 2023 to 2025, respectively. Taking into account the company's development space and technical barriers, we maintain the "recommended" rating.
Risk tips: downstream demand growth is not as expected; new product research and development is not as expected.