Incident: The company announced on August 20 that H1 revenue in 2021 was 332 million yuan (+47.74%), net profit of the mother was 21 million yuan (+17.22%), net profit of the non-return mother was 21 million yuan (+30.04%), gross profit margin 22.86% (-4.21pcts), and the net interest rate was 6.35% (-1.65pcts).
Key points of investment:
The company's revenue grew rapidly. The net profit of its subsidiaries Xuanyu Space and Xuanyu Intelligent increased markedly. During the reporting period, the company's operating income (332 million yuan, +47.74%) achieved rapid growth, net profit of the mother (21 million yuan, +17.22%) grew steadily, and net profit of the non-homing mother (21 million yuan, +30.04%) achieved rapid growth, mainly due to the fact that the company's intelligent equipment business in the nuclear industry entered a centralized construction period to achieve batch delivery of products. The share of revenue from the nuclear industry and intelligent equipment systems for special environments increased, but their gross margin was relatively low, and the gross margin of the railway business declined, leading to a decline in the overall gross profit margin (22.86%, -4.21pcts) and net profit margin (6.35%, -1.65pcts).
Specifically, the company's business includes three major segments: railway vehicle operation safety inspection and maintenance systems, intelligent test simulation systems and microsystems and control components, and intelligent equipment systems for the nuclear industry and special environments.
During the reporting period:
① The company's railway vehicle operation safety inspection and maintenance system business revenue (69 million yuan, +24.94%) achieved rapid growth, while the gross profit margin (19.51%, -17.78pcts) declined significantly. Referring to the disclosure in the company's first quarterly report, there were changes in the company's railway business sales product structure, and the proportion of sales of high-profit products declined. We believe this is also the main reason for the decline in the company's overall gross margin of railway-related business in 2021H1;
② The company's intelligent test simulation system and microsystem and control component business revenue (100 million yuan, +11.99%) and gross profit margin (30.22%, +4.12pcts) have both increased steadily. Judging from the net profit (0.09 billion yuan, +167.49%) and operating profit margin (10.31%, +4.27pcts) of Xuanyu Space, a wholly-owned subsidiary of the company that undertakes this business, are expected to further increase in the overall profitability of the company's intelligent test simulation system and microsystem and control component business in 2021 improve;
③ The company's nuclear industry and special environment intelligent equipment system business revenue (163 million yuan, +103.40%) doubled, and the gross profit margin (19.76%, -1.33pcts) declined slightly. Combined with a slight decline in the sales profit margin (12.22%, -0.59pcts) of Xuanyu Intelligence, a wholly-owned subsidiary that undertook the business, the profitability of the company's nuclear industry and special environment intelligent equipment systems business can still be maintained at previous levels against the backdrop of a sharp increase in performance.
In addition, the company's wholly-owned subsidiaries Xuanyu Space and Xuanyu Intelligence promised net profit of 98 million yuan in 2021 (up 13.51% from actual net profit in 2020) and 27 million yuan (down 2.61% from actual net profit in 2020). The net profit of the two subsidiaries in 202H1 (Xuanyu Space: 0.09 million yuan, +167.49%; Xuanyu Intelligence: 17 million yuan, +95.93%) have achieved rapid growth. At the same time, the company's Shunyi Aerospace Industrial Park satellite application intelligent equipment industrial base project is progressing. Looking at it, we expect less pressure on the company's two wholly-owned subsidiaries to meet their promised net profit targets in 2021, and are expected to exceed their performance promises.
The company has strong ability to manage and control expenses. A number of financial data show that orders are plentiful. Continued promotion of fund-raising projects will gradually increase the company's performance in terms of flexible expenses. During the reporting period, the company's financial expenses (0.02 billion yuan, +96.12%) increased dramatically, mainly because the intelligent equipment business in the nuclear industry entered a centralized construction period, capital requirements increased, and loans increased. Overall, under the rapid increase in the company's revenue, the three expense rates (11.91%, -1.31pcts) have declined to a certain extent, showing that the company's ability to manage expenses is strong.
In terms of cash flow, during the reporting period, net cash flow from the company's operating activities (-156 million yuan, -313.81%) declined sharply, mainly because the nuclear industry intelligent equipment business entered the centralized construction period and production investment increased; the net cash flow from fund-raising activities (139 million yuan) increased 334 million yuan compared to 2020H1, mainly due to the fact that the nuclear industry intelligent equipment business entered the centralized construction period, capital requirements increased and borrowing increased.
In terms of other financial data, at the end of the reporting period, the company's advance payments ($337 million, up 93.33% from the beginning of the reporting period) and contract liabilities ($475 million, up 44.65% from the beginning of the reporting period) both showed rapid growth. The total book value of inventory reached 992 million yuan, of which the products (709 million yuan, up 43.67% from the beginning of the reporting period) grew rapidly. Combined with the company's anticipated increase in related purchases in 2021 ($205 million, +41.17%) compared to 2020, we believe that the company's on-hand orders were sufficient. It is actively preparing and producing goods. Additionally, the company has 132 million yuan of distributed products in its inventory, all of which are expected to be realized in the future.
It is worth noting that in 2019, the company raised funds through a private stock offering to invest in the Shunyi Aerospace Industrial Park satellite application intelligent equipment industrial base project, weapons and equipment control system component R&D capacity building project, next-generation intelligent measurement and control simulation system R&D and capacity building project, intelligent microsystem module R&D and capacity building project, and special robot R&D and capacity building, all of which are expected to reach their intended use by the end of 2022. Although the actual capital raised by the company was reduced compared to expectations, the company revealed that the construction content of the original fund-raising project and various sub-projects had not changed, and that the shortfall was solved by the company using its own funds or self-financing. According to the company's disclosure in 2019 in the “Issuance of Shares and Payment of Cash to Purchase Assets and Raise Supporting Funds and Related Transactions Report”, the company's Shunyi Aerospace Industrial Park satellite application intelligent equipment industry base project, weapon control system component R&D and capacity building project, next-generation intelligent measurement and control simulation system R&D and capacity building project, intelligent microsystem module R&D and capacity building project can achieve annual sales revenue of 1,157 million yuan after delivery, and special robot R&D and capacity building projects can achieve annual sales revenue of 378 million yuan after delivery. Overall, according to the original plan, all of the company's projects can bring the company a total annual sales revenue of 1,535 billion yuan after delivery, accounting for 135.24% of the company's revenue in 2020.
Based on the disclosure of the company's investor relations activities, construction of all of the plants in the company's Shunyi Aerospace Industrial Park satellite application intelligent equipment industrial base project has already begun. It is expected that they will be completed and put into use within the year. Overall, we judge that with the continuous promotion of the company's various fund-raising projects, the company's performance elasticity is expected to gradually increase. We recommend focusing on the focus.
During the “14th Five-Year Plan” period, the company's intelligent test simulation system and microsystem and control component business and nuclear industry automation equipment business are expected to become the main growth points for the company's revenue and profit
The company belongs to the China Space Technology Research Institute under the Aerospace Science and Technology Group. It closely focuses on control technology, focusing on the three strategic industry fields of rail transit, aerospace, and nuclear industry, forming an industrial pattern in the three major business segments of railway vehicle operation safety inspection and maintenance systems, intelligent test simulation systems and microsystems and control components, and nuclear industry automation equipment.
① Railway vehicle operation safety inspection and maintenance system
In terms of railway vehicle operation safety inspection and maintenance business, the company is mainly engaged in R&D, production, sales, installation and service of equipment related to the field of railway vehicle operation safety inspection and locomotive maintenance automation. The products mainly include infrared axle temperature detection systems for railway vehicles, dynamic image detection systems for vehicle operating faults, trackside acoustic diagnosis systems for early vehicle rolling bearing failures, railside inspection systems for vehicle operation quality, and related safety inspection informatization products.
During the reporting period, the company successfully won bids for projects such as the Beijing Bureau Vehicle Axle Temperature Intelligent Detection Equipment (THDS), the Nanchang Truck Fault Trackside Image Inspection System (TFDS), and the China Aviation Development Sichuan Gas Turbine Research Institute Intelligent Three-Dimensional Library Project. The railway truck intelligent robot inspection system development project uses an artificial intelligence robot as the operating platform and is equipped with a machine vision inspection device. It has now entered the trial operation stage; the inspection robot project has completed scientific research and establishment at China Railway Hohhot Administration Group Co., Ltd., and has now entered the trial operation stage.
Currently, the company's railway vehicle operation safety inspection and maintenance systems are mainly aimed at domestic and foreign rail transit markets, including railways and urban rail transit.
In terms of railways, according to China Railway Group's disclosure, the country's railway fixed asset investment reached 781.9 billion yuan in 2020, with a cumulative production process of 4933 kilometers. According to the latest data, 2021H1 railway fixed asset investment in the country reached a total of 298.949 billion yuan, a year-on-year decrease of 8.26%. For the first time in nearly six years, it was less than 300 billion yuan. Judging from this, we believe that China's railway construction mileage has slowed down, and that the future may focus more on the operation and management of existing railways and the upgrading of information technology construction.
In terms of urban rail transit, according to the Ministry of Transport's disclosure, in 2020, 39 new urban rail transit lines were added throughout the year, adding 12,40.3 kilometers of operating mileage, an increase of 20.1% over last year. According to statistics from the China Urban Rail Transit Association, 2021H1 China added 478.97 kilometers of new urban rail transit operating lines, and it is expected that the length of new operating lines for 202H2 will be around 700 kilometers. As can be seen, the new operating mileage of China's rail transit is still expected to exceed 1,100 kilometers throughout 2021. The whole year The cumulative operating mileage of China's rail transit is expected to exceed 9,000 kilometers. We anticipate that in the future, demand for safety monitoring and maintenance systems for urban rail transit is also expected to continue to grow as rail transit operating mileage increases.
Overall, we judge that in the post-pandemic era, the company's railway safety monitoring and maintenance system business is expected to usher in restorative growth in the short term, while in the medium to long term, the company's overall revenue from railway safety monitoring and maintenance systems is expected to maintain steady growth.
② Intelligent test simulation system and microsystem and control components
The intelligent test simulation system and microsystem and control component business mainly includes two categories of products:
In terms of intelligent test simulation systems, the company is mainly engaged in the development of intelligent testing and simulation products. The products can meet the requirements of complex functional testing, high reliability and high performance verification, and intelligent testing of complex systems and their control components. They have the characteristics of platformization, generalization, miniaturization, modularity, etc., and have functions such as informatization and data management of test simulation processes. They have been widely successfully applied to aerospace control system ground simulation testing, embedded computer ground testing and test data management, etc., which can provide a simulation and verification platform for complex systems and complex stand-alone machines. Intelligent test simulation systems are mainly used in aerospace, aviation, defense equipment and other fields.
In terms of microsystems and control components, the company's products mainly include modular and integrated microsystems, as well as high-density integrated lightweight and miniaturized control components based on microsystem technology, which are mainly used in control systems for complex intelligent equipment such as aerospace. Microsystems mainly include products such as on-chip microprocessors and memories, and control components mainly include inertial navigation sensors, microprocessors, motors and other products. Microsystem integration modules and components are mainly used in the aerospace field.
During the reporting period, the company's subsidiary Xuanyu Space signed a ground test interface simulator contract and a cognitive training software contract. I applied for and received a key core component engineering task from a ministry to carry out “stuck in the neck” technology research and product development around high-performance and highly reliable microprocessor chips. The high-reliability microsystem computer module implementation transformation and application project has completed the design and small-batch production of low-cost high-reliability microsystem chips; the industrial high-performance controller project has now designed and finalized two microcontroller chips for industrial control, national power grids, and commercial aerospace fields. Sample production is expected to be completed by the end of the year; small-batch production of the aerospace-grade radiation-resistant synchronous rectifier step-down switching power supply chip has been completed.
Overall, we believe that the development of the company's intelligent test simulation system and microsystem and control component business is closely related to the needs of China's aerospace defense equipment and major aerospace engineering projects. During the “14th Five-Year Plan” period, whether in domestic or military trade, demand for expendable aerospace defense equipment such as missiles, guided bombs, guided rockets, etc. is expected to show a rapid growth trend. The Aerospace Science and Technology Group has revealed that it plans to schedule more than 40 space launch missions in 2021. During the “14th Five-Year Plan” period, many major aerospace projects in China will be carried out soon during the “14th Five-Year Plan” period, and many commercial space projects are also expected to be gradually implemented. In the above context, as one of the supporting enterprises of the national team of aerospace and military enterprises, we judge the company's future intelligent testing systems and microsystems and control components Business order demand is likely to grow rapidly.
③ Nuclear industry automation equipment
The nuclear industry automation equipment business mainly includes two categories of products: ① Intelligent equipment systems: they are mainly engaged in R&D, production and sales of intelligent equipment systems applied to “three special” fields such as special environments, special needs, and special industries. The main products include intelligent precision assembly systems, automation platforms, etc. ② Remote operating device: Special mechatronic key equipment for process operation in a special environment. The main products include detection robot systems, etc. The intelligent equipment system business mainly focuses on “three special” fields such as special industries, special environments, and special requirements. Technology, products and services are widely used in the nuclear industry and other industries with special environmental requirements. During the reporting period, while ensuring the continuous implementation of orders for key projects in the nuclear industry, the company simultaneously focused on expanding business areas such as post-processing and decommissioning, and successfully won bids for CNNC component storage racks, etc.; the heavy-duty multifunctional nuclear operation robot development project successfully passed the inspection by the Beijing Municipal Science and Technology Commission. The core products were localized, and the equipment was autonomous and controllable, and can be applied to ground equipment maintenance and guarantee.
According to the “China Nuclear Energy Development Report 2021”, at present, by the end of 2020, there are 48 commercial nuclear power units in mainland China, with a total installed capacity of 49.88 million kilowatts, ranking third in the world after the United States and France. At the same time, there are 17 nuclear power units under construction in China, with a total capacity of 18.53 million kilowatts. Overall, all domestic nuclear power projects under construction are progressing steadily. Overall, China's nuclear industry will continue to develop rapidly during the “14th Five-Year Plan” period, while the company's subsidiary Xuanyu Intelligent's intelligent equipment products are mainly used in the nuclear industry and special environment fields. They are important support equipment for achieving intelligence and informatization. They will generate huge market demand and broad application space with the rapid development of China's nuclear industry in the future. Therefore, we expect that with the rapid development of China's nuclear industry during the “14th Five-Year Plan” period, the company's market demand for nuclear industry automation equipment will continue to grow.
In summary, during the “14th Five-Year Plan” period, demand for the company's intelligent test simulation system and microsystem and control component business, and nuclear industry automation equipment business is expected to continue to grow rapidly. With the gradual promotion of the company's fund-raising projects, the production capacity of the company's intelligent test simulation systems, microsystem and control components, and nuclear industry automation equipment business is expected to gradually increase. The scale effect is also expected to further increase the profitability of the company's two businesses. We judge that the “14th Five-Year Plan” company's intelligent test simulation system, microsystem and control component business, and nuclear industry automation equipment business are driving the company's overall revenue and net profit to maintain rapid growth.
Investment advice
We believe that as an industrial development platform, institutional mechanism innovation platform, and asset securitization platform in the field of intelligent equipment of the Fifth Academy of the Aerospace Science and Technology Group, the company has accumulated deep technology. The end of major asset restructuring in 2019 expanded the company's business to the aerospace and nuclear industry. The specific views are as follows:
① As a listed company belonging to the Aerospace Science and Technology Group, the company has accumulated deep technology in the field of aerospace support and relies on aerospace brand advantages. The company has certain advantages in market expansion;
② The aerospace defense equipment and major aerospace engineering fields where the company's intelligent test simulation system and microsystem and control component business are located are all expected to experience a high boom during the “14th Five-Year Plan” period, and the company's revenue from this business is expected to enter a period of rapid growth; ③ With the continuous advancement of the company's 2019 fund-raising projects, the company's production capacity is expected to gradually increase. The “14th Five-Year Plan” company's intelligent test simulation system and microsystem and control component business, and nuclear industry automation equipment business are driving rapid growth in the company's overall revenue and net profit is strong;
④ The company has strong ability to manage and control expenses. With the rapid growth of the company's overall revenue in the future, the company's profitability is also expected to remain at a high level.
Based on the above views, we expect the company's revenue for 2021-2023 to be 1,539 million yuan, 1,984 million yuan and 2,499 million yuan respectively, and net profit of 179 million yuan, 224 million yuan, and 282 million yuan respectively. We gave a target price of 1,460 yuan, corresponding to PE 58 times, 47 times and 37 times for 2021-2023.
Risk warning: The company's nuclear industry automatic equipment marketing fell short of expectations; the progress of the company's fund-raising projects fell short of expectations; the development cycle of aerospace product technology was long.
