Main points of investment
Market development efforts continue, performance in line with the performance forecast. In the first half of 2017, the company realized operating income of 181 million yuan (+ 131.71%) and net profit of 20.37 million yuan belonging to the parent company (turning losses to profits over the same period last year), realizing EPS0.08 yuan. Through business transformation and market development, the company's revenue increased significantly in the first half of the year, of which military revenue increased by 69.11 million yuan over the same period last year, and civil product revenue increased by 43.72 million yuan over the same period last year. In the follow-up, with the company's further efforts to expand the market, optimize product structure, improve R & D efficiency and accelerate market response and other measures, the company's profitability is also expected to enhance.
The development of the market has been effective, and the development of military business has shown initial results. The company has actively developed the military market in the first half of the year and has signed a number of purchase orders with military customers, involving man-portable air defense missile combat command systems, ground reconnaissance systems, ground detection radars and other military products. Among them, the revenue of the company's representative military man-portable air defense missile command system increased significantly, with an increase of more than 5000 percentage points over the same period last year, and gross profit margin increased by 38.42 percentage points year-on-year. In addition, the company actively promotes the research and development of short-range air defense weapon systems, air defense missile combat command systems and other military products, and the company's military business may further benefit as the military market continues to recover.
The company's military-to-civilian strategy continues to advance, and there is a lot of room for growth in the field of civilian products. At the end of last year, the company formulated a new development strategy and actively promoted the process of civilian use of military products, adding a new civil business section based on integrated electronics, intelligent security, intelligent coastal defense and communications electronics. Over the past six months, relying on the company's technical advantages in the military field, the research and development of related civilian products has been progressing smoothly, including air traffic control radar, ground reconnaissance surveillance radar, ground reconnaissance command system, and multi-model autonomous underwater vehicles. At present, the company has signed a number of purchase orders in the field of civil navigation and intelligent security, and we expect that after the amount of investment, the company's civil products will have a lot of room for development.
Continue to promote the integration of resources and promote the coordinated development of various businesses. In addition to the epitaxial mergers and acquisitions around the business layout last year, the company has also formed a close strategic partnership with the Electronic Science and Technology Group and the China Arms Group this year, and carried out in-depth cooperation with Guoxin Holdings, Shipping Group, Aerospace Science and Industry Group and other companies to further deepen the sharing of resources and technology. We judge that if the follow-up capital of the company operates properly and continues to optimize the company's industrial chain and product structure, it can effectively enhance the company's market competitiveness and profitability, and the development prospect is worth looking forward to.
Risk factors: the progress of military reform is not as expected; the progress of military market expansion is not as expected; the expansion of civilian business market is not as expected.
Profit forecast, valuation and investment rating. Taking into account the uncertainty of the company's business expansion and the external environment, we maintain the company's annual EPS forecast of 0.16max 0.19max in 2017-18-19, and the current stock price is 29.35RMB, corresponding to the 183max PE in 2017-18-19 is 122times. Taking into account the future development prospects of the company's business and the continuous promotion of civil-military integration, maintain the company's "overweight" rating, the target price yuan.