Event: the company disclosed its annual report 2020 on March 22. During the reporting period, the company realized operating income of 577 million yuan (+ 22.38%), net profit of 80.6105 million yuan (+ 1657.46%), basic earnings per share of 0.14 yuan (+ 1660.98%), gross profit margin of 53.99% (+ 3.63pcts), net profit rate of 14.52% (+ 13.43pcts), ROE of 8.30% (+ 7.81pcts), revenue and net profit of mass entrepreneurship and innovation record high.
Main points of investment:
Closely following the highly prosperous track of Beidou Navigation and IC market, the company achieved a substantial increase in operating income of 577 million yuan (+ 22.38%) during the reporting period. The performance growth is mainly due to the historic opportunity for the company to grasp the growth of market demand in the integrated circuit industry and the formal networking operation of Beidou global navigation system, and actively strengthen the speed of new product launch and the intensity of market expansion. Continuously strengthen the R & D investment and supply guarantee capacity. The substantial increase in the company's parent net profit (+ 1657.46%) is mainly due to the fact that the company set aside the long-term equity impairment loss of 20.0446 million yuan last year, which affected the profit last year, resulting in a low base last year. Excluding the long-term equity impairment loss, the growth rate of the company's net profit was about 227.33%, while the company's overall gross profit margin increased to 53.99% (+ 3.63pcts). Mainly benefiting from the acceleration of the global networking of Beidou system and the development of the integrated circuit industry, the sales of satellite navigation terminals, components and modules with high gross profit margin in the company's main business have achieved rapid growth.
The company's R & D investment has increased, and the overall amount of expenditure is relatively stable. The total cost of the company in the current period is 232 million yuan (+ 17.57%), of which the R & D expenditure of 79.6641 million yuan (+ 35.87%) is due to the increase in R & D investment and the increase in processing fees for R & D projects, mainly realizing the innovation and upgrading of key products such as SDR, converter, Beidou 3 chip and high-speed interface in integrated circuits. Carry out R & D and innovation in the design of Beidou 3 baseband terminal, and strengthen the research and development of video security and satellite integrated applications, which will help the company to provide more comprehensive and complete demand for the market in the future.
At the same time, we noticed that the inventory at the end of the reporting period was 481 million yuan, an increase of 62.41% over the same period last year, mainly due to the expansion of the company's business scale, the corresponding expansion of raw material inventory (+ 87.67%), as well as the increase in the finished products of components, Beidou terminal products, related commissioned processing materials, products in process (+ 31.04%) and the cost of unfinished security monitoring projects. At the same time, the income corresponding to the company's performance obligations that have signed a contract at the end of this reporting period but have not yet been fulfilled or have not been completed is 718 million yuan, which is expected to be completed by December 31, 2023.
A number of research and development projects have been steadily promoted, and the accelerated development of the Beidou industry has promoted the rapid expansion of the Beidou business plate.
The company focuses on the product development, production, sales and operation of the "component-terminal-system-service" integrated industry chain. The company's main business plate includes integrated circuit plate, Beidou terminal and operational business plate and security monitoring plate.
During the reporting period, the company's integrated circuit business revenue reached 208 million yuan, an increase of 26.44% over the same period last year, with a gross profit margin of 58.49% (+ 1.51pcts), mainly due to the growth of market demand in the integrated circuit industry and the company's active promotion of product production and delivery. The company's integrated circuit products belong to analog circuits, mainly digital-analog hybrid integrated circuits that process analog and digital signals. During the reporting period, the company strengthened the development of new products in key application directions based on market demand, focusing on breaking through the core technologies such as radio frequency transceiver, high-speed signal, interface and converter, and realized the innovation and upgrading of key products such as software radio, converter, high-speed interface, Beidou 3 devices and so on. At the same time, in order to rapidly enhance the company's technical strength in analog IP and digital-analog hybrid IP, and fill the company's shortcomings in the field of high-speed serial interface technology, the company invested 8.95 million yuan to acquire the Serdes IP technical team during the reporting period, which formed a strong support for the company's converter, software radio, HD video transmission and other key technology products to improve the high performance indicators.
The company's revenue from Beidou terminal and operating business reached 251 million yuan, an increase of 60.30% over the same period last year, with a gross profit margin of 59.25% (- 8.34pcts), mainly due to the growth of industry orders and the networking of Beidou global system, and the company actively promoted the production and delivery of products. 2020 is the first year of Beidou global navigation system networking, the company focuses on strengthening the development and application of Beidou 3 related products, and carries out integrated application research based on location service.
Complete the technological breakthrough in the development of GNSS high-precision receiver; complete the pilot application of the comprehensive application platform for geological disaster prevention and control in a certain place; at the same time, based on the "Satellite Internet Integrated Application Service Cloud platform", launch the application of land geological disaster detection in the key areas of land disaster, emergency management, transportation, and accurate cities, some of the products have been applied to Jiangxi, Liangshan, Guizhou and other geological disaster projects.
The revenue of the company's security monitoring business was 117 million yuan, down 18.34% from the same period last year, and the gross profit margin was 34.22% (+ 10.60pcts). Mainly due to the influence of COVID-19 's epidemic situation, many project plans and schedules were delayed, and the company concentrated its efforts on ensuring the progress of key projects and developing high-quality projects, and successfully won the bid for Skynet renovation and new projects in some districts and counties of Chengdu and Aba Prefecture. Maintain the sustainable development of the company's business in the traditional advantage areas of Skynet in the southwest region. At the same time, the company has gradually realized the transformation of the company's video image processing application to digital and intelligent direction, making every effort to break through the landing of the AI product market of public security and airport, the airport process management and control system has completed version 3.0 development, and has been launched in 12 large domestic airports.
According to the preliminary plan for issuing A shares to a specific target, the number of shares issued in this initial public offering in recent years will be determined according to the total amount of funds raised divided by the issue price, at the same time, the number of shares issued this time shall not exceed 10% of the total share capital of 557.34 million shares of the company before this issue, that is, 55.734 million shares (including capital), and the total amount of shares to be raised in this issue shall not exceed 185 million yuan (including 185 million yuan). The net funds raised will be used for: 1) 135 million yuan for the research and development of Beidou 3 multi-function core chip and industrialization project; 2) 50 million yuan for supplementary working capital. The construction period of the Beidou 3 multi-function core chip R & D and industrialization project takes 24 months, on the basis that the company has broken through the key technologies of Beidou 3, aiming at the opportunity of the upgrading of Beidou terminal equipment and the upcoming outbreak of Beidou short message communication application, we have developed a variety of Beidou 3 core chips to lay out Beidou navigation and communication applications under global coverage in the future.
The company plans to adopt 28nm and below advanced chip technology to develop the next generation Beidou 3 core chip and achieve mass production, further improve the sensitivity, positioning accuracy and other core indicators, greatly reduce chip power consumption, and comprehensively improve the market competitiveness of the company's Beidou chip. the high-performance Beidou core chip developed by the project has the characteristics of small size, low power consumption, high precision and integrated short message communication. Solve the advanced technology and performance bottleneck of the new generation of Beidou core chip, greatly enhance the company's core competitiveness, and gradually replace some foreign GNSS chips, with broad market prospects.
Investment suggestion
We believe that, 1) the company has deeply ploughed the field of Beidou, and has built a complete industrial chain of "components-terminals-systems and operations" in the field of Beidou, and has been in the domestic leading level in the development and production of core chip terminals. With the boom of Beidou industry, the increasing requirements of various types of intelligent terminals for the quantity and performance of IC products, and the influence of external uncertainties such as trade disputes, more attention has been paid to the localization of chips, and the demand for high-performance IC in downstream applications such as aerospace, navigation, communications, computers, automotive electronics and video imaging will be further released and enhanced in the future. And maintain a certain scale growth rate for a long time, the company's main business is expected to benefit from the increase in industry demand, and further release and improve performance. 2) there has been a large number of confirmed contracts: the income corresponding to the company's performance obligations that have signed contracts but have not yet been fulfilled or completed at the end of this reporting period is 718 million yuan, which is expected to be completed by December 31, 2023. 3) the fund-raising investment plan project closely revolves around the company's main business, and the implementation of the project will help the company to seize the development opportunity of the downstream terminal market brought about by the completion of Beidou 3 satellite networking. after implementation, it will help to speed up the implementation of the company's product strategy and improve operating performance, strengthen the company's ability to accumulate technology in related fields and cope with changes in downstream demand, and enhance the company's competitiveness and industry status.
Based on the above point of view, we estimate that the operating income of the company from 2021 to 2023 is 729 million yuan, 943 million yuan and 1.225 billion yuan respectively, the net profit of returning to the mother is 108 million yuan, 131 million yuan and 160 million yuan respectively, and the EPS is 0.19,0.24 yuan and 0.29 yuan respectively. We give a "buy" rating, with a target price of 20.00 yuan, corresponding to 105,83 and 69 times the projected earnings for 2021-2023 PE.
Risk tips: business development is not as expected, the company litigation settlement process is not as expected, the fund-raising plan process is not as expected, and the fund-raising project progress is not as expected.