Investment Rating - The report maintains a "Buy" rating for the company with a target price of 73.44 RMB [7][8]. Core Insights - The company reported a revenue of 5.025 billion RMB in 2024, a year-on-year decrease of 19.08%, and a net profit attributable to shareholders of 347 million RMB, down 53.75% year-on-year, primarily due to a temporary slowdown in defense demand and adjustments in product structure [1]. - The company is expected to see a rapid recovery in demand as the defense sector completes its planned objectives by the end of the 14th Five-Year Plan, leading to a forecasted increase in revenue and net profit for 2025 [1]. - The company has shown significant improvement in its asset-liability structure, with inventory increasing by 74.16% year-on-year to 18.51 billion RMB, indicating a recovery in downstream demand [3]. Summary by Sections Financial Performance - In 2024, the relay business generated 249 million RMB in revenue (down 23.66% year-on-year) with a gross margin of 47.11% (up 1.58 percentage points) [2]. - The connector business reported revenue of 3.388 billion RMB (down 23.57% year-on-year) with a gross margin of 38.68% (up 0.89 percentage points) [2]. - The company’s overall expense ratio increased to 29.15% in 2024, reflecting a decrease in revenue while maintaining relatively fixed costs [2]. Growth Prospects - The company is expanding into new product areas, including high-power interconnects and microwave components, with a notable increase in orders for these new products [3]. - A planned acquisition of a 32.70% stake in a subsidiary is expected to enhance the application of optoelectronic products in the defense sector, further optimizing the company's industrial structure [3]. Profit Forecast and Valuation - The profit forecast for 2025-2027 has been adjusted downward, with expected net profits of 774 million RMB, 1.043 billion RMB, and 1.33 billion RMB respectively [4]. - The company is assigned a price-to-earnings (PE) ratio of 43 times for 2025, leading to a target price of 73.44 RMB, down from a previous estimate of 81.12 RMB [4].