Performance is in line with expectations
Guangqi Science announced 1H16 results: revenue of HK $312 million (RMB 267 million), an increase of 432% over the same period last year; net profit of HK $106 million (RMB 90.38 million), corresponding to a profit per share of HK $0.01HK (RMB 90.38 million), in line with our expectations.
Revenue growth is strong and gross profit margins have risen sharply. 1H16, the future technology business to achieve revenue of 285 million Hong Kong dollars, mainly contributed to the substantial increase in sales of cloud terminals. Driven by this, the company's total revenue increased more than fivefold, and the composite gross profit margin rose sharply to 62.9% 25.8ppt.
Accounts receivable increased to HK $547 million, of which 65 per cent were not yet due and 35 per cent were delayed for more than half a year; however, due to the fact that the deferred receivables correspond to customers of relevant government agencies and have a sound financial background, it is not expected to cause recovery problems.
Trend of development
Pay attention to the future process of technology commercialization. Since its delivery in 2015, Dongguan Yunduan has been running steadily, and the Yunduan project has been gradually promoted to different cities in China. In the second half of the year, Guangqi's future technology commercialization process is expected to focus on breakthroughs, including the public testing and flight of the Sun Ark, as well as the release and recovery of the manned Voyager. In addition, the Martin flight bag is still in the stage of repeated safety performance testing and is expected to be put into commercial use in 2017.
Profit forecast
The net profit of 2016e/2017e will be increased by 5.8% to 227 million yuan / 363 million yuan, corresponding to 0.04 yuan / 0.06 yuan 2016e/2017e EPS.
Valuation and suggestion
At present, the company's share price corresponds to 62.9x/40.4x 2016e/2017e Pamp E. We maintain our "neutral" rating, but raise our target price by 6% to HK $3.18, corresponding to 47x 2017e Phammer E.
Risk.
There is uncertainty in product development and delivery.