Event: the company released a semi-annual report that in the first half of 2021, the company achieved operating income of 1.035 billion yuan, an increase of 25.9% over the same period last year, and a net profit of 188 million yuan, an increase of 31.2% over the same period last year.
The growth of performance is in line with expectations, and the operating situation is marginal. The company's 2021H1 gave full play to its market-leading role, the aviation military business continued to maintain rapid growth, and the sensor control business expanded strongly in consumer electronics, smart logistics and other emerging industries, achieving a total revenue of 1.035 billion yuan (YoY + 25.9%) and a net profit of 188 million yuan (YoY + 31.2%). From a quarterly point of view, 2021Q1 and Q2 achieved operating income of 416 million yuan (YoY+28.7%) and 619 million yuan (YoY+ 24.13%), respectively, and returned to their mother net profit of 40 million yuan (YoY+19.5%) and 148 million yuan (YoY+ 34.9%). The growth rate of the company's quarterly revenue slowed slightly compared with the same period last year, while the year-on-year growth rate of net profit increased, reflecting the marginal improvement of the company's operating conditions.
With the joint development of the military and the people, aviation military products + sensor control has grown steadily. The on-time delivery rate of the company's aviation military products has greatly increased, completed the phased scientific research and production tasks, and achieved "double more than half" of revenue and profit. 2021H1 achieved a revenue of 248 million yuan (YoY+64.1%), which was higher than we had expected, with a gross profit margin of 35.43% (YoY+1.75pct) and improved profitability. The application field of sensor control business was further expanded, and continued to maintain rapid growth in consumer electronics, intelligent logistics and other fields. 2021H1 revenue of 534 million yuan (YoY+41.3%) was better than expected, but due to changes in the product structure of the business, gross profit margin was 35.26%, reducing 1.66pct, still maintaining a good profitability. It is worth noting that due to the gradual release of the policy dividend for the upgrading of industry standards, the company's intelligent transportation business declined, achieving a revenue of 218 million yuan (YoY-18.7%) and a gross profit margin of 45.32%, down 1.43pct from the same period last year. We expect the business to show a periodic revenue contraction in the next few years, which will also be a drag on the company's profits.
The expenses are continuously optimized and the profitability is steadily improved. The company's 2021H1 gross profit margin was 37.94%, down 2.53pct from the same period last year, and the expense rate during the period was 12.85%, which decreased 1.75pct from the same period last year, partially offsetting the decline in gross profit margin, and the final net profit margin increased 0.83pct. In terms of subdivision, the company's sales expense rate decreased 1.98pct compared with the same period last year, and the management expense rate was basically flat in the case of the company's personnel expansion and no longer enjoying the periodic relief policy of social security during the epidemic, indicating that the company has achieved remarkable results in reducing costs and increasing efficiency.
Implement employee stock ownership and improve the long-term incentive mechanism. The company implemented the first employee stock ownership plan in July 2020 and expired in July 2021. In February 2021, the company plans to buy back 0.6-120 million yuan of shares at a repurchase price of no more than 14.04 yuan per share, which will be used in the second employee stock ownership plan. At present, the company has repurchased a total of 60.81 million yuan, reaching the minimum repurchase commitment. The company has implemented equity incentives twice in the past two years, which has improved the company's long-term incentive and restraint mechanism, which is conducive to improving the cohesion of core staff and demonstrating the company's confidence in development.
Investment suggestion: the net profit of the company from 2021 to 2023 is expected to be 350 million yuan, 440 million yuan and 533 million yuan respectively, and the EPS is 0.59,0.75 and 0.90 yuan respectively. The current stock price corresponds to 31x, 25x and 20x. With reference to comparable company valuations, the company has an advantage in valuation, and the company has proved its growth for many years and continues to maintain its "recommended" rating.
Risk hint: the risk that the company's capacity expansion is less than expected; the risk of a decline in gross profit margin.