Key points of investment
Mainly engaged in special active phased array T/R components and RF integrated circuits, with full downstream demand for military and civilian use, the company is a leading domestic enterprise that can provide active phased array T/R components and serialized RF integrated circuit products in batches. It belongs to China Electronics Technology Group, occupies a dominant position in technology in the domestic military electronics and network communication fields, and develops core chips and key components that are widely used in various types of special and civilian equipment.
The company achieved revenue of 1.9 billion yuan in 2023H1, an increase of 11% over the previous year, and a CAGR of 25% in 2020-2022; in 2023H1, it achieved net profit of 309 million yuan, an increase of 18% over the previous year, and a 30% CAGR in 2020-2022.
T/R module leader, land, air, and sky multi-scenario applications: active phased array radar has higher accuracy and stronger anti-interference ability. It is the main development trend of radar technology. T/R components are the core components, accounting for a high proportion of value; the company's products are widely used in missile, airborne, etc., and is one of the domestic R&D and production platforms for active phased array T/R components with the largest sales volume for various military industrial groups. The product is located in the middle of the industry chain. The future benefits from the rapid development of accurate guidance, radar detection, and satellite Internet fields.
5G drives the demand for base stations and industrial chain construction, and the demand for domestic replacement of RF integrated circuits is urgent: the company's products include high-power control and amplification modules. The products cover multiple frequency bands and are used in mobile communication base stations and other fields. The main product performance of the next-generation GaN RF module launched by the company, such as linearity, efficiency, and reliability, is comparable to that of mainstream international products. The product coverage, variety, and technology have reached the level of advanced international manufacturers. The future is expected to benefit from the increase in the number of base stations built, the increase in the value of RF devices, and changes in base station technology to achieve rapid development in the industry.
Focus on the main business, and multiple benefits help the company grow steadily
Driver 1. Group shareholders have a strong background, and employee shareholding is deeply tied. CLP Guoji Southern Group Co., Ltd., the largest shareholder of the company, has inherited the deep accumulation of 55 institutes over many years and formed a complete technical system and product chain from design, process to packaging and testing, from materials, chips to modules; many company executives have held core positions at 55, and some of the company's directors, supervisors and technicians directly or indirectly hold shares in Nanjing Xinrui; driving 2, focusing on autonomy and control, and research-based development: The company undertakes many national key tasks, has accumulated a good brand reputation, and established a good industry comparative advantage; driving 3. Technological leadership The industry has a large competitive advantage: in the T/R component field, the company has developed hundreds of products for major military industrial groups, with a complete range of product types and models, which has a great competitive advantage over peer companies; in the RF field, it competes with internationally renowned companies, and the series of products are widely used in next-generation mobile communication base stations.
Driver 4. Entering RF chips for mobile phone terminals, consumer electronics opens the ceiling of development: The company has received a tender and procurement notice for RF chips for mobile phone terminals. Preliminary estimates estimate that sales will be 110 million yuan, which may indicate that the company has entered the field of consumer electronics RF chips, and is expected to fully benefit from the growth of the TOC side and the increase in the localization rate.
Profit forecasting and valuation
The company's net profit from 2023-2025 is estimated at 6.4/82/1.14 billion yuan, up 24%, 28%, and 38% year on year. PE in 2023-2025 was 52/40/29 times, respectively. First coverage, giving a “buy” rating.
Risk warning: the risk that the product has not completed the military price review and that business performance will be affected, the risk of increased market competition, and the risk of the T/R component procurement model for the complete machine unit changing from external procurement to internal support, etc.