Incidents:
On August 17, the company released its semi-annual report. It achieved revenue of 169 million yuan in the first half of the year, an increase of 42.73% over the previous year, and the net profit of the mother was 48 million yuan, an increase of 45.44% over the previous year.
Comment:
1. The release of satellite navigation series products is the main driving factor for the company's performance growth. The company has participated in the development of multiple equipment models in recent years. Many products have been finalized and entered the mass production stage. The products have evolved from modules to complete machine support to system support. 2021H1, the company's satellite navigation series products achieved revenue of 126 million yuan, an increase of 119% over the previous year. We believe that with the gradual release of equipment models, the company's satellite navigation series products will maintain a high growth rate.
2. The acquisition of Nanjing Firefly achieved the rapid evolution of products from antennas to terminals and systems. In the first half of the year, the company obtained 51% of Nanjing Firefly's shares with 122 million dollars in cash. Nanjing Firefly focuses on R&D and technical services for satellite communications and wireless self-networking communication systems. Its core team has been engaged in system design, signal processing, and equipment development for a long time. The products have been industrialized by clients. The company's holding of Nanjing Firefly helps promote the formation of a systematic technology system for satellite communication and achieve the rapid evolution of products from antennas to terminals and systems.
3. Establish the Electronic Competition Division as a new strategic development direction. In the first half of 2021, the company adopted electronic confrontation as the strategic development direction of the company's business through industry development and market demand analysis, and established the Electronic Competition Division. At the same time, it increased resource investment in market development, technology development, talent introduction, etc., to lay out the company's new business growth points in the future. The company's research projects include electronic countermeasure related projects such as fast forwarding interference technology based on DRFM and millimeter wave power synthesis technology. We believe that millimeter-wave guides are the final guidance method commonly used for precision guided munitions. They pose a huge threat to our military's ground equipment, and there is broad market space for millimeter-wave electronics to compete in the future.
4. Satellite communication services need to improve overseas epidemics
In terms of overseas satellite communication business, due to the impact of the COVID-19 pandemic, customer demand is highly uncertain. Overseas revenue declined sharply year on year during the reporting period, leading to a year-on-year decline in overall satellite communication business revenue. In the first half of the year, the company's satellite communications achieved operating revenue of 43.3 million yuan, a year-on-year decrease of 29.00%. The recovery of satellite communications services is yet to be improved by the overseas epidemic.
Profit forecast and investment rating: We expect the company's net profit forecast for 2021-2023 to be 1.50, 2.26, and 330 million yuan respectively, up 40%, 51%, and 46% year-on-year. The current stock price corresponding to 2021-2023 PE is 56, 37, and 25 times, respectively. It is covered for the first time, giving a “recommended” rating.
Risk warning
The procurement and delivery of weapons and equipment fell short of expectations, the expansion of the electronic warfare business fell short of expectations, and the price reduction of military products exceeded expectations.
