Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, revenue was 1.814 billion yuan, or -35.83% YoY; net profit to mother was 0.306 billion yuan, or -31.93% YoY.

Key points of investment

In the field of T/R components and RF modules, the decline in unit prices has put pressure on the company's revenue and profits:

Mainly due to the decline in T/R module and RF module business revenue this year, the company's performance was under relative pressure. In the first three quarters of 2024, it achieved operating income of 1.814 billion yuan, or -35.83% year-on-year; net profit to mother was 0.306 billion yuan, or -31.93% year-on-year. Among them, the overall performance for the third quarter continued. In 2024Q3, revenue of 0.511 billion yuan was achieved, or -43.51% year-on-year, and net profit to mother was 0.062 billion yuan, or 56.28% year-on-year. As base station investment slowed after the peak of 5G investment, base station equipment manufacturers' demand for RF integrated circuits and GaN RF modules declined, which in turn affected the sales performance of the company's related products. At the same time, although the company has made progress in technology research and product development work in the field of low-orbit satellites and commercial space, it has not yet formed sufficient market contribution to offset the impact of declining demand in the base station sector.

Major accounting data and financial indicators changed significantly: 2024Q3, net cash flow from operating activities reached -0.214 billion yuan, +45.19% year over year; as of the third quarter of 2024, net cash flow from operating activities reached 0.147 billion yuan, an increase of 159.40% year over year. The former was due to a decrease in purchase payments compared to the same period last year, while the latter was due to an increase in cash received due to bills receivable due. 2024Q3 R&D investment reached 0.077 billion yuan, a year-on-year decrease of 8.38%, and 2024Q1-Q3 reached 0.257 billion yuan, a year-on-year decrease of 2.34%, while the proportion of R&D investment in revenue increased. These changes reflect the impact of the company's business adjustments and market changes during the reporting period.

The company recently obtained a plan to increase the holdings of the controlling shareholder Guoji Southern and its co-actor China Telecom Investment. The proposed increase in holdings is not less than 0.4 billion yuan and no more than 0.7 billion yuan: this act shows the controlling shareholders' confidence in the company's future development and recognition of medium- to long-term investment value. The controlling shareholders' increase in holdings is generally regarded as positive for the company's future development. It can enhance the market's confidence in Guobo Electronics, and may attract more investors' attention and investment, and support the stock price. By increasing their shareholding, controlling shareholders can optimize the company's capital structure, enhance the company's financing capabilities, and provide financial support for the company's potential expansion and innovation. The act of increasing holdings itself is a channel for releasing positive information to the outside world. It helps to form positive market expectations for the company's future, and may drive other investors to follow suit and form a virtuous cycle.

Profit forecast and investment rating: The company is under relative pressure. We lowered the company's 2024-2026 net profit forecast to 0.476/0.556/0.703 billion yuan, the previous value was 0.567/0.736/0.962 billion yuan. The corresponding PE was 70/60/47 times, respectively, maintaining the “buy” rating.

Risk warning: 1) the risk of new product development; 2) the risk of losing core technology; 3) the risk of losing core technical personnel; 4) the risk of increased market competition.