CATEC(SH:600879) HTSC·2025-03-27 11:09Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 12.27 [7][8]. Core Views - The company achieved a revenue of RMB 14.28 billion in 2024, a year-on-year decrease of 23.75%, while the net profit attributable to shareholders was RMB 548 million, an increase of 4.42% year-on-year. The decline in revenue is attributed to weak downstream demand in the aerospace electronics business [1]. - The company is expected to see a rapid release of previously accumulated demand as the end of the "14th Five-Year Plan" approaches, alongside continued high demand in the unmanned systems business, which is projected to drive significant profit growth from 2025 to 2027 [1][4]. - The company is focusing on optimizing its business and resource integration, which is expected to enhance overall profit margins starting in 2025 [2]. Summary by Sections Revenue and Profitability - The aerospace military products business is projected to generate revenue of RMB 11.82 billion in 2024, down 17.36% year-on-year due to industry demand slowdown. The company completed a 51% equity transfer of its subsidiary, which will contribute approximately RMB 2.373 billion in revenue with a gross margin of 15.24%, lower than the military business's 21.89% [2]. - The company plans to increase focus on aerospace electronics and unmanned systems, which are expected to significantly improve overall gross margins [2]. Unmanned Systems Growth - The subsidiary, Aerospace Feihong, achieved revenue of RMB 1.57 billion in 2024, marking a year-on-year increase of 42.48%, indicating strong demand for unmanned systems [3]. - The company is expanding its unmanned equipment system offerings, with new products like the "Hongzha" autonomous task system and the FH-96V carrier-based composite wing drone, which are expected to meet the growing market demand for unmanned systems during the "14th Five-Year Plan" and beyond [3]. Profit Forecast and Valuation - The company has adjusted its profit forecasts, expecting net profits attributable to shareholders of RMB 731 million, RMB 936 million, and RMB 1.161 billion for 2025, 2026, and 2027 respectively, reflecting a downward revision of 17% and 11% for 2025 and 2026 [4]. - The target price is based on a price-to-earnings (PE) ratio of 56 times for 2025, with a revised target price of RMB 12.27, down from RMB 14.58 [4].