Investment logic
The company is a high-quality enterprise of military-civilian integration, with both high growth and growth: the company deeply ploughs the integration of military and civilian, and has two advantageous services of satellite navigation application and military self-organized network. downstream is spread over many core fields such as surveying and mapping, precision agriculture, aviation dispatching, military industry, etc. In recent years, relying on the advantages of technology and channels, the company has actively expanded multi-point applications and constructed a rational business structure, and the mode of self-organizing network to drive high growth and navigation applications to provide sufficient growth has enabled the company to enter a period of rapid development. In the first three quarters of 2018, the company achieved revenue and return net profit of 3.707 billion yuan and 262 million yuan, which was + 279.94% and 267.91% compared with the same period last year. The good operation of the ad hoc network business greatly improved the company's operating cash flow and became a regular employee for the first time since listing.
At the right time for the upgrading of military communications, self-organizing network equipment will become the main performance growth point: China's military reform is moving from the strategic level to the tactical level, and the new joint operations command system of "the Central military Commission in charge of the general, the main battle in the theater, and the main construction of the services" will put forward new requirements for the informationization of weapons and equipment. as the underlying infrastructure and facilities, communications equipment is expected to take the lead in updating. We estimate that only by measuring the demand for individual weapon assembly and the replacement and upgrading of army firepower platforms, in the next three to five years, the total procurement of China's military communications equipment will reach 373.30 to 86.63 billion yuan, corresponding to an annual market space of 74.66 to 28.877 billion yuan. Relying on the accumulation of military genes and years of self-organizing network technology, the company has obtained a total of 5.153 billion yuan in self-organizing network equipment orders since 2017, realizing a great-leap-forward growth of "from 0 to 1".
Card position advantage and global vision are the core competitive advantages, and navigation applications can be promoted and grown in a focused, rhythmic and differentiated manner. We believe that Beidou system and global navigation systems such as GPS do not replace each other in the commercial field, so the key to competition lies in whether the technology and product competitiveness of domestic manufacturers can stand side by side with foreign mature navigation enterprises. The company's core competitiveness in the navigation application industry has two: 1) master the core component technology, and achieve the layout of the whole industry chain, improve product performance and reduce costs to increase efficiency. 2) recognize the different development stages of the navigation industry at home and abroad, and strategically adopt different business layouts on a global scale, so as to achieve step-by-step sustainable growth-surveying and mapping and intelligent public security applications in the short term. Medium-and long-term actively cultivate domestic and foreign precision agriculture preloading, machinery control and other applications. The step-by-step layout enabled the company's Beidou business to maintain high growth, and 2018H1 achieved revenue of 746 million yuan, + 25.38% compared with the same period last year.
Investment advice and valuation
We estimate that the company's revenue from 2018 to 2020 will be 53.86%, 64.14%, 7.535 billion yuan, an increase of 135.4%, 19.1%, 17.5%, and a home net profit of 3.61%, 514,665 million yuan, an increase of 49.26%, 42.34%, 29.47%. The current share price corresponds to the 6-12-month target price of 28X18PE, 20X19PE and 15X20PEPEGe, with a "overweight" rating for the first time.
Risk hint
The upgrading of military communication equipment is not as expected; the poor coordination between the acquisition target and the original business brings goodwill impairment risk; operating cash flow risk; high equity pledge rate risk of major shareholders; the risk of lifting the ban on restricted shares.