The core supplier of army optoelectronic weapons and equipment, the only optoelectronic listing platform for military industry, with great flexibility in reform.
At present, the company mainly focuses on defense products, accounting for 70%-80% of revenue. Three categories of defense products include large-scale weapon integrated system assembly, precision seeker, and military optoelectronic information equipment, which occupy an important position in army equipment. At the same time, the company is currently the only optoelectronic listing platform of the Arms Industry Group, which can pay attention to the progress of asset securitization of the group. The future performance improvement of the company mainly includes three aspects: state-owned enterprise reform, asset injection and management improvement. We estimate that the company's EPS in 2018-2020 will be 0.13,0.17,0.21 yuan respectively, giving the "overweight" rating for the first time.
The integrated platform of large-scale ground weapon system assembly is in the leading position in China.
The company has invested in the field of large-scale weapon system assembly integration for many years, and its products have developed from a single variety of anti-tank missile launchers to derivative series of anti-tank missile launchers, information-based weapon systems, armored reconnaissance vehicles and so on. It is in a leading position in the field of domestic large-scale ground weapon system assembly integration. With the upgrading and upgrading of national defense military equipment, the improvement and replacement of in-service equipment and the development and installation of new equipment have brought market demand, and there is still a large market space in the field of segmentation.
The output of precision seeker is leading in China, and the market share of optical materials is high.
The company's seeker products are mainly laser guidance seeker, through the introduction of foreign production lines, transformation and upgrading, has gradually mastered the key technology, the products are mainly supporting terminal guided shells, laser terminal guided missiles, guided bombs and rockets, etc., according to the company's 2017 annual report, the annual output has been among the largest in China and in the forefront of the world. In addition, the company is one of the important domestic optical material production enterprises, with strong technical and market advantages. The 2017 annual report revealed that the company's international market share reached 12%, and the domestic market share ranked second. The products are widely used in microscopes, gunshots, camera phones, and other traditional optical products, photoelectric displays, optical communications and other emerging fields.
The only optoelectronic information listing platform of Arms Industry Group, which can pay attention to the progress of asset securitization of the group.
The company is the only listing platform of the parent group Northern Optoelectronics Group, and it is also the only optoelectronic information listed company of the Arms Industry Group. From the perspective of asset securitization, the goal of the Arms Industry Group is to increase the asset securitization rate from 20% to 50% during the 13th five-year Plan period, which has more room for improvement. from the point of view of the restructuring of scientific research institutes, in May 2018, the State Administration of Science, Technology and Industry for National Defense approved that the Automation Research Institute of the Armament Group was transformed into an enterprise, and it was the first production and operation military scientific research institute to be transformed into an enterprise, indicating that the transformation of the institute system has officially entered the implementation stage. In this context, sustainable attention should be paid to the progress of asset securitization of Arms Industry Group.
The endogenous growth is steady, the reform benefits are flexible, and the "overweight" rating is given for the first time.
The company is an important optoelectronic listing platform of the Arms Industry Group and is expected to benefit from the group's asset securitization. In addition, the company's current gross profit margin is low, and the reform of the military pricing mechanism will be good for the company. From 2018 to 2020, we expect the company to achieve operating income of 2.211 billion yuan, 2.481 billion yuan and 2.755 billion yuan respectively, and return net profit of 68 million yuan, 89 million yuan and 108 million yuan respectively, corresponding to EPS of 0.13,0.17,0.21 yuan respectively. The average PE of comparable listing in 2019 is 52.76X. Considering the progress of state-owned enterprise reform and group asset securitization, we give a certain valuation premium. In 2019, the company's PE is 68-70X, with a target price range of 11.56-11.9 yuan, with a "overweight" rating for the first time.
Risk hint: the progress of military product development and batch production is lower than expected, and the competition in the industry intensifies.
