Incidents:
Puyuan Precision Electronics released its 2024 quarterly report: In the first quarter of 2024, the company achieved operating income of 151 million yuan, a year-on-year decrease of 3.54%; realized net profit of 06 million yuan, a year-on-year decrease of 72.75%.
Investment highlights:
Gross margin increased year-on-year; R&D expenses and management expenses increased dramatically. In the first quarter of 2024, as the company continued to increase R&D investment, R&D expenses increased 41.57% year on year to 43 million yuan, and R&D expenses increased 9.09pct to 28.52% year over year. At the same time, depreciation of the Shanghai subsidiary plant, which has not yet been officially put into use, and depreciation of the Malaysian subsidiary's usage rights assets were included in management expenses, resulting in a year-on-year increase of 46.15% to 0.22 million yuan, and the management fee ratio increased 4.85pct to 14.26% year-on-year. The sharp increase in expenses suppressed the company's profits in the short term, causing the company's net interest rate to fall 8.48pct year-on-year to 6.31% in the first quarter of 2024.
It is proposed to acquire 67.74% of the shares of Endurance Electronics to enhance comprehensive solution capabilities. Naishu Electronics is a controlling subsidiary of the listed company holding 32.26% of the shares and controlling 51.14% of the voting rights. The company plans to acquire the remaining 67.74% of the underlying company's shares by issuing shares. After the transaction is completed, Naisu Electronics will become a wholly-owned subsidiary of the company. Endurance Electronics has accumulated rich experience in array technology, logic processing and signal analysis, and has accumulated technology for multiple digital playback channels and digital acquisition channels that work simultaneously. At the same time, it has accumulated deep experience in multi-channel radio frequency signal transmission, reception, measurement and processing technology, covering applications such as remote sensing detection, quantum information, radio astronomy, and microwave communication. Through this transaction, the company can integrate the overall solution capabilities and technological research and development advantages of resistant electronics to help the company accelerate transformation and upgrading from a hardware-based electronic measuring instrument supplier to a comprehensive solution provider. After deducting non-recurring profit and loss in the 2024/2025/2026 consolidated statement, the cumulative net profit attributable to the parent company was not less than 87 million yuan over three years, and the net profit attributable to the parent company after deducting non-recurring profit and loss was not less than 15 million yuan every year.
Profit forecast and investment rating We expect the company's 2024/2025/2026 revenue to be 791/9.31/1,114 million yuan, respectively, and net profit to mother of 137/178/240 million yuan respectively, corresponding PE 47/37/27 times; maintain the “increase in holdings” rating.
Risks indicate the risk of macro-market fluctuations; the risk of falling industry demand; R&D progress falling short of expectations; sales volume of high-end products falling short of expectations; the development of new product markets falling short of expectations; the risk of tight component supply; the risk of rising raw materials; the risk of falling gross margin; and the risk of overseas operations.