Incidents:

The company announced the 2024H1 performance report. According to the company's announcement, in 2024H1, the company achieved revenue of 0.118 billion yuan (yoy +6.08%), realized net profit attributable to mother 0.006 billion yuan (yoy -83.21%), and realized net profit without deduction of 0.001 billion yuan (yoy -102.05%). 2024 Q2 achieved revenue of 0.064 billion yuan (yoy -7.82%), realized net profit of 0.011 billion yuan (yoy -56.99%), and realized non-return net profit of 0.005 billion yuan (yoy -78.31%). The 2024H1 performance fell short of market expectations.

Comment:

Keeping an eye on the commercial low-orbit satellite market, the revenue of the three major products remains stable. According to the company announcement, the company achieved revenue of 0.118 billion yuan (yoy +6.08%) in 2024H1. According to our analysis, 1) By product, power management chips achieved revenue of 0.052 billion yuan (yoy +35.86%), ADC/DAC chips achieved revenue of 0.047 billion yuan (yoy -11.34%), and microsystems and modules achieved revenue of 0.015 billion yuan (yoy +47.47%). The company continues to expand the technological leadership of the three main products, keeping an eye on the commercial low-orbit satellite market. It is expected that the future will fully benefit from downstream demand Release acceleration; 2) Considering the company as a core supplier of special chips, the pace of R&D continues to accelerate, along with the further enrichment of the product matrix, combined with subsequent execution of new orders and orderly product delivery, the company's revenue is expected to grow rapidly.

Increased R&D investment costs are under pressure, and performance falls short of market expectations. According to the company announcement, the company achieved net profit of 0.006 billion yuan (YOY -83.21%) in 2024H1. 2024H1's gross margin was 85.17%, down 4.64pcts from the same period last year; 2024H1 net margin decreased 25.38pcts to 4.77% from the same period last year. According to our analysis, 1) the reduction in gross margin is mainly due to changes in the profit structure of products combined with the commissioning of new office buildings to drive an increase in manufacturing costs; 2) the reduction in net profit margin was mainly due to pressure on the cost side. Among them, the cost rate during the 2024H1 period was 68.07%, an increase of 16.71 pcts over the same period last year. The main reason was the high increase in R&D expenses, which increased 10.52 pcts to 56.98% over the same period last year. Considering the company's current R&D expenses, the cost side is expected to improve, and the company's overall profitability is expected to improve in the later stages along with the finalization and mass production of products under development, the product structure continues to be optimized, and the company's overall profitability is expected to increase.

A high level of inventory is expected to translate into performance with product delivery. According to the company announcement, as of the end of H1 2024, the company's inventory was 0.118 billion yuan, an increase of 0.012 billion yuan over the beginning of the year. According to our analysis, 1) the company is actively preparing for production, and the phased array radar and satellite industry is in strong demand, which validates the industry's boom; 2) with the execution of subsequent orders, downstream demand is being released at an accelerated pace, and inventory is being converted into revenue one after another, which is expected to drive a steady recovery in future performance.

Deeply involved in the field of special high-end chips, three major logics help to steadily improve profitability. 1) As a core supplier of special high-end chips, the company's three major businesses are expected to be released along with demand for downstream satellites and radars, driving rapid revenue growth; 2) The company has superior product performance, benchmarking the international advanced level, building industry barriers to ensure steady expansion of the existing market share; 3) The company focuses on the commercial low-orbit satellite market, and has newly developed and iterated on several series of mass-producible products. The future core will benefit from the acceleration of domestic constellation construction.

The 2024-2026E profit forecast was lowered and the “Buy” rating was maintained. Considering the company's increased R&D investment combined with fluctuations in gross margin, we lowered the company's 2024-2026E net profit to 0.088/0.122/0.176 billion yuan (previous value was 0.103/0.151/0.234 billion yuan), and the current stock price corresponding PE is 49/36/25 times, respectively. We selected representative companies related to satellite launch equipment, Chengchang Technology (phased array T/R chip), Shanghai Hanxun (phased array antenna, etc.), and Tianyin Electromechanical (Star Sensor Company, etc.) for comparison. The average PE value in 2024 is 60, and the company's PE valuation is lower than the industry average. Considering the company's superior product performance, strong market competitiveness, and the core benefits from accelerated domestic constellation construction, the company's future performance is expected to achieve rapid growth, so it maintains a “buy” rating.

Risk warning: Product delivery falls short of expectations; market competition increases risk; domestic constellation construction falls short of expectations.