Event

On July 19, the company announced that Huaqing Ruida, a wholly-owned subsidiary, signed a "letter of intent" with shareholders of Yiwei Chuang to acquire 65% of the target company held by the transferor in cash.

Brief comment

Vertical integration of microwave components suppliers, give full play to industrial synergy to master the core technology of key components, stable research and development to reduce costs. Chengdu Yiwei Chuang Technology Co., Ltd. is engaged in the design and production of microwave components, the main products include frequency source, frequency synthesizer, frequency converter, RF front-end and other key components of radar communication system. Yiwei is a supplier of Huaqing Rida, and has deep technical cooperation with the company in the field of radar and electronic warfare. This acquisition will help the company to strengthen the control of the technical status and R & D route of key components, combined with the technical accumulation of microwave components, to achieve unified planning and R & D of civil radar and electronic equipment products, and to achieve technical and price advantages relative to imported electronic instruments. At the same time, with 2018, 2019 and 2020 as the performance commitment period, the non-net profit deducted by the target company will not be less than 8 million yuan, 9 million yuan and 10 million yuan respectively, and the transferor will increase its stake in Tianyin mechanical and electrical shares not less than 20 million yuan through the secondary market within 3 months after receiving the equity transfer price.

Military electronic layout land, sea, air and sky, new products competitive release to create a new growth point radar simulator business horizontal expansion, market share further increased. In 2017, the subsidiary Huaqing Ruida horizontally expanded the traditional radar template simulator to radar targets and electronic warfare simulators, communication signal simulators, ATE excitation sources and other electromagnetic frequency security products, and added major customers such as Huaihai Industrial Group (affiliated to Chinese weapons) and Situang Electronics, further increasing its market share.

The new business of military electronics has created new performance growth points. High-speed signal processing series products: Huaqing Ruida high-speed signal processing products help a group of customers win international military trade bidding, and establish a reputation for the company's business development of this series of products. Avionics module: mainly used for fixed-wing aircraft, helicopters, drones, etc., including display and control modules and radio altimeter, some models will enter the stage of mass production. Ultra-wideband signal acquisition and analysis system: related products are banned abroad. Subsidiary information analysis technology key indicators have been no less than foreign well-known manufacturers, is expected to be supporting for the domestic electronic leader. Star sensor: four of the "one arrow and six stars" successfully launched by the long March 11 rocket have used the products of the subsidiary Tianyin Interstellar, and have added more customers, such as Sha Tianyi, Shenzhen Dongfang Red Sea, Shanghai Micro Satellite Engineering Center, and so on, which will expand into the military field in the future.

The acquisition of Leixin of the University of Technology leads to land, sea, air and space, and the layout of military electronics is becoming more and more perfect. The Leixin ground wave over-the-horizon radar products of the University of Technology are widely used in the military and civil fields, and the market space is huge. Military: we estimate that the military demand is 20,30 units, the price of each unit is about 50 million, and the market space is between 1 billion and 1.5 billion. Civilian use:

If the target of monitoring the whole sea area is achieved, it is estimated that China's demand for civilian version of ground wave radar is between 100,140 units, and the market space is about 60.840 billion at a unit price of 6 million. Military trade: the demand is about 40,60 units, with a market space of 3.2billion to 4.8 billion. After the acquisition of Leixin of the University of Technology, the company also added the overall radar and core components of the new system on the basis of radar matching, the combination of strong and strong, the synergy is highlighted.

Many kinds of white electric products are leading in the industry, and the steady growth is expected.

Compressor starter: the company is one of the most powerful compressor starter enterprises in China. In 2017, the company sold a total of 38.3502 million PTC starters and reactive power starters, accounting for about 25% of the market. Suction silencer: the company is the world's largest supplier of suction silencers with the most stable product quality, with nearly 40 million suction silencers in the reporting period, accounting for 26.2%. Refrigerator frequency conversion controller: affected by the implementation of the new national standard policy on energy efficiency of refrigerators and the adoption of new energy efficiency labels for household appliances in the European Union in the second half of 2017, as the core component of high-end refrigerators, the market demand continues to rise. In 2017, the company sold 2.21 million refrigerator flat controllers, accounting for 17.40%.

Driven by positive factors such as the implementation of the new energy efficiency standards and the new EU energy efficiency label, the market demand for PTC starters and frequency conversion controllers continues to rise, especially the frequency conversion controller business ushered in rapid growth, driving the company's home appliance product performance to achieve rapid growth. At present, the market share of environmental protection and energy-saving products is still low, and there is a lot of room for upgrading, which is enough to support the long-term steady growth of the company's white electricity business.

Profit forecast and investment rating: the business growth of Baidian is steady, and the integration pattern of the military electronics industry is emerging. It is expected to maintain the rapid development of the company to carry out industrial integration around Huaqing Ruida, and will give full play to the synergy effect in the future. the market demand for military information products is large and the growth rate is fast, and several new military products create new growth points. It is estimated that the company's net profit from 2018 to 2020 will be 225 million yuan, 280 million yuan and 344 million yuan respectively, an increase of 18.63%, 24.16% and 22.83% respectively over the same period last year. The corresponding EPS for 18 to 20 years is 0.52,0.65 and 0.80 yuan respectively, and the stock price PE before the corresponding period is 24, 19 and 15 times respectively.