Event

On October 29, the company released three quarterly reports, with operating income of 151 million yuan in the first three quarters of 2018, an increase of 7.23% over the same period last year, and net profit of 35 million yuan, an increase of 28.61% over the same period last year.

Meet expectations in the first three quarters and complete the annual plan without worry.

On October 29, the company released three quarterly reports, with operating income of 151 million yuan in the first three quarters of 2018, an increase of 7.23% over the same period last year, and net profit of 35 million yuan, an increase of 28.61% over the same period last year. In the third quarter of 2018, the net profit in a single quarter was 12 million yuan, an increase of 0.52% over the same period last year. The impact of non-recurrent profit and loss on net profit in the first three quarters of the company is 8.98 million yuan, mainly due to government subsidies and financial income received by the company.

The company's gross profit margin in the first three quarters was 46.22%, which remained at a high level and was basically the same as in the same period last year. The company attaches great importance to R & D and innovation and increases the proportion of high value-added military products. During the reporting period, the company's R & D expenses increased by 43.66% compared with the same period last year, adding stamina to the company's follow-up development. The company expects to achieve an operating income of 230 million yuan, an operating profit of 46.84 million yuan and a total profit of 82.29 million yuan in 2018. As of the first three quarters, the revenue company has completed 65.65% of the annual plan.

The company ploughs the field of pyrotechnics and actively develops civilian shadow equipment.

Since its inception, the company has been engaged in explosive devices and related products research and development, production and sales, while carrying out military and civilian products business, committed to the development of civil-military integration industry. The company's military business mainly includes the R & D, production and sales of military explosive devices (including pyrotechnics components, pyrotechnics devices, etc.), which are widely used in the weapons and equipment of our army, navy, air force, rocket force, strategic support force, public security and armed police. At the same time, the company cooperates with domestic military trade companies to actively expand foreign markets.

The development of the explosive device industry that the company is engaged in can be divided into five stages: the first generation of explosive devices are mechanical initiators and pyrotechnics made of mercury mine as primary explosive or agents containing mercury mine; the second generation initiating devices are all kinds of sensitive initiating devices made of conventional primary explosives such as lead nitride and trinitroresorcinol lead, which still occupy an important position at present. The third generation is insensitive EED, the application range and quantity are gradually increasing; the fourth generation EED is high safety explosive device, which has been used now, but due to the limitations of size, ignition energy and cost, the application range and quantity are not large; the fifth generation initiator is an integrated product or array with precise control energy, which is still in the process of development and maturity. At present, the company is mainly in the second and third generation stage in the field of initiating explosive devices, and there is a huge space for follow-up development.

While maintaining the stable development of military business, the company actively develops civilian business. Civil products business mainly includes the R & D, production and sales of special technical equipment and special blasting equipment for artificial weather influence. In terms of artificial weather products, the company revolves around the whole process of artificial weather operation, a complete product system has been constructed, including artificial weather blasting equipment, weather operation equipment, meteorological equipment, management and information software. Basically formed the detection of meteorological conditions before weather operation, on-site shadow operation, on-site operation command, operation process monitoring, rocket storage, shadow operation and shadow explosive equipment information management and after-sales service and other whole industry chain pattern.

The company is one of the earliest enterprises engaged in the R & D and production of artificial weather anti-hail anti-hail and rain-increasing rockets in China, with an annual production capacity of 50,000 artificial weather anti-hail and rain-increasing rockets, and its production capacity and market share rank in the forefront of the country. It has established good cooperative relations with meteorological departments of more than 20 provinces, cities and autonomous regions, such as Jiangxi and Hunan. In the future, the company will continue to increase R & D investment in the field of meteorological equipment, and further enhance software research and development capabilities and develop related software and information management systems through the acquisition of Nanjing Lei Software Company. improve the information level and comprehensive competitiveness of the company's products. At the same time, through the establishment of the Beijing branch, the company will actively dock and expand the military-civilian integration business in the field of shadow and meteorology, and train the company to develop new growth points.

The company has strong R & D strength and continuous efforts in industrial upgrading.

After years of development, the company has gathered a team of high-quality management and product development, design and manufacturing professionals, so far the company has 46 authorized patents. In the first half of 2018, the company invested 7.2947 million yuan in research and development, accounting for 31.64% of its net profit and 7.62% of its operating income. The company has more than 90 military product research projects, including 2 national high-tech engineering projects, more than 20 national key weapons and equipment projects, more than 30 civil products research projects and 5 technical appraisal projects. the rest of the research projects have also made varying degrees of progress, adding stamina to the development of the company.

In recent years, the company has actively carried out industry-university-research cooperation and developed collaborative innovation. In terms of military products, the company has carried out the development of a new pyrotechnic material and pyrotechnic components with a certain research institute, and carried out strategic cooperation with Nanjing University of Science and Technology Institute of Chemical Technology. In terms of integration of civilian products and military industry, the company carried out typhoon detection project with Shanghai Typhoon Institute of China Meteorological Administration, carried out research with Institute of Atmospheric Physics of Chinese Academy of Sciences on projects such as stratospheric meteorological sounding, drone launching and snow depth detection, and cooperated with Beijing Institute of Technology to develop meteorological sounding rocket. These cooperation will continue to promote the company's product scientific and technological innovation and industrial upgrading, continue to cultivate new profit growth points, but also provide a strong support for the company's long-term development.

Profit forecast and investment advice: continue to benefit from the policy of civil-military integration, and the proportion of high value-added military products continues to increase.

Under the macro background that the country continues to vigorously promote the deep integration of the military and the people and the national defense expenditure is expected to maintain rapid growth, the company actively carries out industry-university-research cooperation to promote product scientific and technological innovation. The company continues to strengthen the research and development of military products, military orders continue to increase, and the proportion of high value-added products continues to increase. In terms of civilian shadow equipment, the company has a full range of products and obvious first-in advantages, and will continue to benefit from the policy of civil-military integration. We firmly look at the future development of the company. It is estimated that the company's net profit from 2018 to 2020 will be 51 million yuan, 61 million yuan and 74 million yuan respectively, an increase of 13.3%, 19.6% and 21.3% respectively over the same period last year. The EPS for 18 to 20 years is 0.63,0.76 and 0.92 yuan respectively, and the previous share price PE is 44.3,37.1,30.6 times respectively.