Incident: The company discloses its 2024 quarterly report.

Key points of investment

Affected by new production capacity investment and strong R&D investment, profit growth is under pressure in the short term. Waiting for high-end new product sales in 2024, the company will achieve operating income of 150 million yuan, a year-on-year decrease of 3.5%, and net profit to mother of 6.31 million yuan, a year-on-year decrease of 73%. In 2024, the company's gross sales margin was 54.8%, up 0.58pct year on year, and the net sales margin was 6.3%, down 8.48pct year on year. The company's expense ratio for the Q1 period in 2024 was 61.9%, up 16.68pct year on year. Among them, sales/management/ R&D/ finance rates were 16.57%/14.26%/28.52%/2.54%, respectively, up 0.54/4.85/9.09/2.20pct, respectively. Management and R&D expenses increased significantly. The company's net profit/net interest rate declined year on year, mainly due to (1) R&D investment continued to increase, R&D expenses increased by 42% year on year, (2) Shanghai and Malaysia factory real estate capacity has not yet been released, depreciation accruals affect net interest rates, and (3) high-end new products are still in the promotion period. In April 2024, the company held a technical conference to announce the new modular technology, and released system solutions for remote sensing and communications, radio astronomy, quantum information, and industrial automation measurement under this technology platform. The profit growth rate is expected to recover in the future as the company's new properties are released and new high-end products deliver results.

Release a restricted stock incentive plan to show confidence in growth

On April 29, 2024, the company issued a draft restricted stock incentive plan to grant 80 core employees a total of 2.8 million shares, accounting for 1.5% of the total share capital on the announcement date. The incentive plan is divided into categories 1 and 2. The number of Class 1 restricted stocks is 1.6 million shares, and the number of Class II restricted stocks is 1.2 million. The shares all come from fixed increases or repurchases. The incentive plan assesses the company's performance indicators on an annual basis. The assessment period is 2024/2025. The trigger values are a 15% year-on-year increase in revenue or a 10% year-on-year increase in net profit; the target values are all 20% year-on-year increase in revenue. Or net profit increased 20% year over year. The equity incentive plan binds the company's core employees, demonstrating confidence in growth.

The domestic and foreign layout is perfect, and the leading electronic measuring instrument company has transformed into a comprehensive solution provider. The company has new production capacity and new business layout at home and abroad, contributing to medium- to long-term growth: ① Malaysia project:

It is expected to be put into use in May 2024. After delivery, it will have an annual production capacity of 80,000 units of various electronic measuring instruments, adding an average annual revenue/net profit of 31/029 million yuan. ② Xi'an R&D Center Project: Completed in March 2024. Taking advantage of Xi'an's talent gathering advantages, it focuses on key technologies related to process design of high-frequency band, ultra-wideband microwave RF instrument components and wireless communication protocol analysis. ③ Shanghai Lingang Industrial Park: R&D and production of on-site measuring instruments (modular instruments, test boards, test cabinets, etc.) for use in communications, industrial electronics, consumer electronics and other industries, still under construction. Comparable to the company's modular instrument leader, NI, earned 11.5 billion yuan in 2022, and there is plenty of room for long-term growth. ④ M&A of Beijing Naishu Electronics: In January 2024, the company issued an announcement to acquire 100% of Beijing Naishu Electronics's shares by issuing shares and paying cash, with the aim of improving the company's ability to provide overall solutions. Naishu Electronics had revenue of 51.96 million yuan in 2023, net profit of 19.05 million yuan, net profit of 36.7%, and according to performance promises, the total contribution of Naisu Electronics 2024-2026 was not less than 87 million yuan, no less than 15 million yuan per year. It itself is excellent in quality. Subsequent mergers and acquisitions and business synergy effects between the two parties are expected to create new growth points.

Profit forecast and investment rating: We maintain the company's 2024-2026 net profit forecast of 1.6/2.1/260 million yuan. The current market value corresponds to PE of 41/31/25 times, and maintains an “increase” rating.

Risk warning: geopolitical risk, rising raw material prices, risk of exchange rate fluctuations