Sichuan Jiuzhou Electronic (000801) 华鑫证券·2024-03-29 16:00Investment Rating - The report initiates coverage on the company with a "Buy" rating [1] Core Views - The company is well-positioned in the air traffic control (ATC) industry and has promising prospects in the low-altitude economy sector [1] - Excluding the impact of the acquisition, the company's net profit is forecasted to be RMB 259 million, RMB 334 million, and RMB 419 million for 2024-2026, with EPS of RMB 0.25, RMB 0.33, and RMB 0.41, respectively [1] - The current stock price corresponds to a PE ratio of 52x, 40x, and 32x for 2024-2026 [1] Company Overview - The company is the largest military and civilian ATC system and equipment R&D and production base in China, serving as a key supplier in the domestic ATC market [8] - It focuses on the R&D, manufacturing, and sales of ATC and related avionics equipment, with over 100 proprietary ATC products covering the entire flight process [8] - The company is expected to benefit significantly from the development of the low-altitude economy [8] Acquisition of Zhiliang Electronics - The company announced plans to acquire 100% of Zhiliang Electronics for RMB 6.57 per share, aiming to expand into electronic warfare and enhance its market competitiveness [8] - Zhiliang Electronics is a high-growth enterprise in the military electronics sector, specializing in electronic reconnaissance, electronic jamming, radar countermeasures, and simulation training [8] Financial Performance - In 2023, the company reported revenue of RMB 3.832 billion, a slight decrease of 1.36% YoY, with net profit attributable to shareholders of RMB 200 million, up 1.23% YoY [17] - The company's core businesses—smart terminals, ATC products, and microwave RF—showed steady growth, with ATC product revenue increasing by 11.20% YoY to RMB 1.113 billion [17] - The company's gross margin improved to 23.80%, up 1.48 percentage points YoY [17] Low-Altitude Economy Development - The low-altitude economy has gained policy support, with the market size expected to reach RMB 1.5 trillion by 2025 and RMB 3.5 trillion by 2035 [13] - The company is well-positioned to capitalize on this growth opportunity, given its strong presence in the ATC sector [8][13] Financial Forecasts - Revenue is projected to grow from RMB 3.832 billion in 2023 to RMB 5.913 billion in 2026, with a CAGR of 16.4% [23][30] - Net profit attributable to shareholders is expected to increase from RMB 200 million in 2023 to RMB 419 million in 2026, with a CAGR of 29.4% [23][30] - The company's ROE is forecasted to rise from 6.2% in 2023 to 10.5% in 2026 [23][30] Valuation Metrics - The company's P/E ratio is expected to decline from 66.9x in 2023 to 32.0x in 2026, reflecting improved profitability [23] - The P/S ratio is projected to decrease from 3.5x in 2023 to 2.3x in 2026, indicating better valuation attractiveness [23]