Investment Rating - The report assigns a "Buy-A" investment rating to the company with a 12-month target price of 68.16 CNY [5][7]. Core Views - The company experienced a revenue decline of 13.37% year-on-year in H1 2025, with total revenue reaching 417 million CNY. However, the net profit attributable to shareholders decreased only by 3.18% to 77 million CNY, indicating resilience in profitability despite revenue challenges [1][2]. - The company is actively enhancing its production capacity and optimizing its operations, particularly in the ammunition equipment sector, which saw a revenue increase of 2.75% year-on-year [4]. - Research and development investments are being prioritized, with a total expected investment of 517 million CNY in ongoing projects, reflecting the company's commitment to innovation and future growth [3]. Summary by Sections Financial Performance - In H1 2025, the company's military product revenue was 396 million CNY, down 13.92% year-on-year, while civilian product revenue increased by 3.75% to 20 million CNY. The overall gross margin improved to 38.41%, up 2.25 percentage points year-on-year, and the net profit margin rose to 18.52%, an increase of 1.27 percentage points [2]. Research and Development - The company increased its R&D expenses by 29.21% to 55 million CNY, indicating a strong focus on innovation. The total investment in R&D projects is projected to reach 517 million CNY, with 394 million CNY already invested [3]. Production Capacity - The ammunition equipment business generated 170 million CNY in revenue, with a notable performance from the subsidiary, which achieved a 22.03% increase in revenue. The company is also optimizing its production lines to enhance capacity by over 20% [4]. Future Projections - The company is projected to achieve net profits of 241 million CNY, 297 million CNY, and 356 million CNY for the years 2025, 2026, and 2027, respectively, with growth rates of 21.3%, 23.1%, and 19.9% [5][6].

Core Viewpoint - The company reported a significant decline in 2024 revenue due to delays in defense product deliveries, but showed a recovery in Q1 2025 with a notable increase in revenue and profitability [1][4]. Financial Performance - In 2024, the company achieved revenue of 1.3 billion yuan, a year-on-year decrease of 41%, primarily due to delays in defense product deliveries. However, revenue from civilian products reached 760 million yuan, a year-on-year increase of 29% [1]. - The net profit attributable to shareholders for 2024 was -210 million yuan, a shift from profit to loss, mainly due to delayed defense product deliveries and increased R&D investments [1]. - For Q1 2025, the company reported revenue of 310 million yuan, a year-on-year increase of 33% and a quarter-on-quarter increase of 21%. The net profit attributable to shareholders was 960,000 yuan, marking a return to profitability [1]. Profitability Analysis - In 2024, the company's gross margin was 9.8%, a decrease of 6.9 percentage points year-on-year, while the net margin was -15.9%, a decline of 19 percentage points year-on-year, primarily due to delays in defense product deliveries [1]. - In Q1 2025, the gross margin improved to 19.2%, an increase of 6.6 percentage points year-on-year, and the net margin was 0.4%, an increase of 4.5 percentage points year-on-year, indicating a rapid recovery in profitability [1]. Expense Analysis - The expense ratio for 2024 was 26.2%, an increase of 11.7 percentage points year-on-year. The breakdown includes a sales expense ratio of 0.7%, a management expense ratio of 12.9%, a R&D expense ratio of 13.1%, and a financial expense ratio of -0.52% [2]. Industry Insights - The defense sector is experiencing rapid advancements in information technology and increasing demand for precision-guided munitions. The company is a leader in this niche market with high product barriers [2]. - The company possesses strong core technology in laser-guided munitions and is actively expanding into infrared, television, radar, and composite guidance technologies, anticipating a continuous release of demand as the penetration of precision-guided weapons increases [2]. - The optical materials and components industry is seeing a shift towards China, with the company’s subsidiary covering the entire industry chain from materials to infrared lenses, holding a global market share of approximately 15% and a Chinese market share of about 30% [3]. Investment Outlook - The company is expected to achieve revenues of 2.3 billion yuan, 3 billion yuan, and 3.8 billion yuan from 2025 to 2027, with a compound annual growth rate (CAGR) of 28%. The net profit attributable to shareholders is projected to be 80 million yuan, 110 million yuan, and 140 million yuan during the same period, with a CAGR of 31% [4].

Investment Rating - The investment rating for the company is "Buy" with a target price set for the next six months [7][18]. Core Views - The company reported a revenue of 10.36 billion in 2024, a year-on-year decrease of 10.6%, and a net profit of 640 million, down 52.2% year-on-year, primarily due to price adjustments by key model customers [1]. - The company is focusing on high-value areas in aviation, with commercial aviation revenue exceeding 1 billion, a 71% increase year-on-year, and a growing market share in key aviation models [2]. - The company is actively expanding into new fields such as civil aviation, commercial engines, aerospace, and deep-sea markets, with a long-term goal of achieving stable growth [4]. Financial Performance - In 2024, the comprehensive gross margin was 23.7%, down 7.59 percentage points year-on-year, and the net profit margin was 7.4%, down 5.84 percentage points year-on-year [1]. - The company’s revenue forecast for 2025 is 11.51 billion, representing an 11% year-on-year growth, with net profit expected to reach 1.26 billion, a 97.57% increase [5][6]. - The company’s operating cash flow was negative 80 million in 2024, a significant decline from 700 million in the previous year, primarily due to difficulties in sales collections [3]. Business Segmentation - The forging and casting business generated 8.27 billion in revenue, down 11.5% year-on-year, while the hydraulic and environmental control business achieved 1.84 billion, down 7.3% year-on-year [2]. - The company’s focus on research and development is evident, with a R&D expense ratio of 6.5%, supporting technological innovation and industry upgrades [3]. Future Outlook - The company aims to achieve a revenue of 11.5 billion in 2025, with a profit target of 1.3 billion, indicating a strong growth trajectory [4][5]. - The company is building a comprehensive material research and regeneration system, which is expected to enhance long-term profitability by potentially reducing material costs [4].