Main points of investment:
The performance was in line with expectations and the expense rate was significantly reduced during the period. In the first three quarters of 2018, the company achieved revenue of 1.155 billion yuan (+ 41.05%), net profit of 44.68 million yuan (+ 118.21%) and EPS of 0.09 yuan (+ 125.00%). The performance was in line with expectations. During the reporting period, the company's performance delivery products increased, the change in product structure led to a decline in gross profit margin 4.07pcts, the company strengthened to improve quality and efficiency, during the period, the expense rate decreased 8.99pcts, and net profit increased 1.29pcts. It is expected that in the future, with the steady progress of the defense business and the continuous development of the optoelectronic market, the company's performance is expected to maintain rapid growth.
The demand for equipment is improving, and the delivery of final assembly products is expected to accelerate. During the reporting period, the company obtained a number of project development tasks in the field of large-scale weapon system assembly, the seeker field was full of orders, the industry position was stable, and the cooperation between the optoelectronic information equipment field and the overall unit was strengthened. the development of new projects will contribute to the development of foreign trade orders in the future. The company's general assembly products are in good condition, and the cash received for selling goods and providing services has increased by 125% compared with the beginning of the period. at the same time, due to the receipt of progress payment for final assembly products, the company's advance payment has increased from 1.28 million yuan at the beginning of the period to 304 million yuan. Judging from the amount received in advance, we expect the company to speed up the delivery of final assembly products in the future.
Optoelectronic devices have a high market share and open up markets at home and abroad. During the reporting period, the market for optoelectronic materials and devices was stable, and the company's sales increased in terminal areas such as video surveillance, front-loaded vehicles, intelligent projection and so on. Xinhua Huaguang, a subsidiary in the optoelectronic field, actively promotes the cooperation and promotion of end products, broadens the high-end market of military and civilian products, and participates in the publication and implementation of a number of international national standards in the field of infrared chalcogenide glass. The market share of the company's optical glass is more than 30%, and the market share of lanthanide glass is also in the forefront of the industry. in the future, the company will focus on the end market and explore the needs of high-end customers, and the market share of optoelectronic devices is expected to further increase.
The mixed reform of the group is advancing steadily, and the injection of high-quality assets is worth looking forward to. The Arms Group plans to increase the asset securitization rate to 50% by the end of the 13th five-year Plan. With the landing of the "double hundred Action" in August this year, many subsidiaries of the Arms Group have been shortlisted, and the mixed reform of the group and the restructuring of scientific research institutes are expected to accelerate. We expect that as the optoelectronic information business platform of Northern Optoelectronics Group and even the entire weapons industry, there is the possibility of injecting high-quality assets under Northern Optoelectronics Group in the future, and it is expected to become a comprehensive listing platform for laser, night vision and other sub-groups.
Risk factors. The profit growth rate of military and civilian products is not up to expectations; the time and content of asset injection are uncertain.
Profit forecast, valuation and investment rating. Taking into account the accelerated delivery of the company's defense products and the stability of customers downstream of the optoelectronic equipment business, the company maintained its annual EPS forecast of 0.22 shock 0.34 shock 0.41 yuan in 2018-19-20, and the company's current share price is 10.3 yuan, corresponding to the 2018-19-20 PE of 48-31-25, respectively.
Considering the gradual deepening of the reform of the Arms Industry Group, the possibility of the company as an integrated platform for optoelectronic information products is enhanced, and only the expected injection of assets under the Northern Optoelectronics Group is considered, and the "overweight" rating is maintained, with a target price of 12 yuan.
