Event: the company reported that 2021H1 achieved revenue of 694 million (- 1.29%) and net profit of-57 million yuan (- 137.28%).

Core point of view

The increase in performance compared with the same period last year is mainly due to the increase in revenue, sales and financial expenses of radar products in the current period. The company's 21H1 realized revenue of 694 million (- 1.29%) and net profit of-57 million yuan (- 137.28%). The revenue was slightly lower than that of the same period last year, and the performance dropped sharply by 137.28% compared with the same period last year. The main reason is that 1) during the reporting period, due to the lack of revenue generated by the delivery schedule of Bowei Changan radar products, the proportion of the company's high gross profit margin products decreased significantly, resulting in a sharp drop in 21H1's comprehensive gross profit margin to 19.62% year on year. 2) during the period, the expense rate increased to 32.97%, mainly due to the sales expense rate and financial expense rate increased by 2.65% and 1.35% respectively compared with the same period last year. The increase in the sales expense rate is mainly due to the increase in sales service fees and bidding fees during the reporting period, while the increase in the financial expense rate is mainly due to the increase in interest expenses caused by the increase in the scale of long-term factoring financing during the reporting period.

The inventory is + 32.14% higher than the beginning of the period, and the contract liability is + 28.26% higher than the beginning of the period. The end-of-period inventory of the company is 1.891 billion yuan, which is + 32.14% higher than that at the beginning of the period, mainly due to the increase in inventory caused by the commissioning of radar and radar supporting projects. The advance at the end of the period is 140 million yuan, + 203.22% more than at the beginning of the period, due to an increase in the advance payment for materials such as radar and radar spare parts. The contract liability at the end of the period was 415 million yuan, which was 28.26% higher than that at the beginning of the period, mainly due to the increase in customer payment received in advance from the security sector.

Persist in focusing on the main business and promote a new pattern of business development. Radar industry: in the first half of the year, the company further expanded the comprehensive support business such as equipment upgrading, equipment overhaul, medium repair and technical services, and realized the development from a single service to a multi-service. The development and delivery of the digital microwave composite substrate for a certain type of radar was completed ahead of schedule, which conquered the processing difficulty of the structure with the highest number of layers in the history of the printed board. Wisdom industry: the company focuses on the development of Beidou navigation serialization equipment, with the "terminal + operation" service mode to provide professional system solutions for industry users. The company's intelligent discharge robot has achieved continuous growth in sales in the field of metallurgy and chemical industry, successfully developed intelligent silica furnace dispenser and other new products, the saloon car product series has been continuously improved, and the order scale and production capacity have been continuously improved.

Financial Forecast and Investment suggestion

Considering that the gross profit margin of radar equipment and supporting business has improved, we have raised the eps for 21-22 to 1.18,1.24 (the previous value is 1.04,1.19), added 23 years eps1.32 yuan, referred to the comparable company's 21-year average valuation of 46 times, gave the target price 54.28 yuan, and maintained the buy rating.

Risk hint

The product order is not as expected; the progress of restructuring and professional integration is not as expected.