Incident: Company S released its semi-annual report for 2021. In the first half of 2021, the company achieved revenue of 165 million yuan, an increase of 5.15% over the previous year; achieved net profit of 37 million yuan, an increase of 38.52% over the previous year; realized net profit of 34 million yuan after deducting non-return income, an increase of 31.48% over the previous year.
Comments:
Aero engine testing equipment began to grow at a high rate, and testing services declined somewhat due to the pace of acceptance.
In the first half of 2021, the company achieved revenue of 165 million yuan, up 5.15% year on year; by business, test equipment achieved revenue of 137 million yuan, up 10.15% year on year; test and verification services achieved revenue of 170,188 million yuan, down 34.0% year on year. The main reason was that some testing and verification service projects from January to June 2021 took a long time and had not been settled as of June 30. By application, new energy vehicles achieved revenue of 84.2749 million yuan, an increase of 18.46% over the previous year; fuel vehicles and ships achieved revenue of 474.18 million yuan and 18.307 million yuan, respectively, a year-on-year decrease of 6.36% and 38.22%, respectively; the aviation business achieved revenue of 91.51 million yuan, an increase of 162.9% over the previous year, and aero-engine testing equipment began to grow at a high rate.
The share of new energy and aviation businesses has increased, and profitability has increased. In the first half of 2021, the company's gross margin was 41.46%, an increase of 4.92 pct over the previous year; we expect the increase in the company's gross margin in the first half of the year to be mainly due to the increase in the share of the new energy business and aviation business with high gross margin. The net interest rate for the first half of the year was 22.36%, up 5.39 pct year on year; the total cost rate was 15.97%, up 2.27 pct year on year; in the first half of 2021, the company's total expense rate was 34.76%, down 6.14 pct from the previous year; of these, the sales expense ratio was 4.39%, up 0.84 pct from the previous year; the increase in sales expenses was mainly due to the impact of the epidemic in the same period last year, with fewer sales services and travel expenses; the management expense rate increase was 5.86%, up 1.31 pct; the increase in management expenses was mainly due to the IPO period Fees for consulting services have increased a lot.
There are sufficient orders for aviation test equipment in hand, and we are still waiting for the performance to be released. Currently, China's aero engine testing equipment is mainly monopolized by foreign investors such as KAHN in the US and Froude Hofmann in the UK.
Affected by the trade war, the supply of foreign brands has been affected, and China's aero-engine testing equipment urgently needs to be replaced by imports. Joint Testing Technology's aero engine testing equipment is close to the same specifications of leading international companies in terms of main indicators such as maximum power and maximum speed, and has gradually begun to be imported and replaced. According to statistics from the China Aviation Development Bidding Network, as of July 2021, the company's winning bid amount for hydraulic dynamometers had reached 54.2557 million yuan, a rapid increase over the previous year. According to the company's announcement, the company's current order for aero engine testing equipment is 97.1914 million yuan. We believe that sufficient orders in the aviation business are expected to guarantee rapid growth in the company's performance.
Profit forecast and investment rating: We expect the company's net profit from 2021 to 2023 to be 102 million yuan, 141 million yuan, and 192 million yuan, respectively. The corresponding EPS is 1.61 yuan/share, 2.21 yuan/share, and 3.02 yuan/share, corresponding to the current share price PE 48 times, 35 times, and 24 times, respectively. Maintain the company's “buy” rating.
Risk factors: Demand for new energy testing equipment falls short of expectations, import substitution of hydraulic dynamometers falls short of expectations, and industry competition intensifies.