Events:
The company released the third quarter report of 2018: from January to September, the operating income was 3.707 billion yuan, an increase of 279.74% over the same period last year; the net profit was 262 million yuan, an increase of 267.91% over the same period last year; and the net profit excluding non-recurring profit and loss was 237 million yuan, an increase of 285.82% over the same period last year.
Cash flow from business activities is returned, and the authenticity of the order is verified.
The net cash flow generated by the company's operating activities from January to September was 16 million yuan, an increase of 101.82% over the same period last year, of which the net cash flow generated by operating activities in the third quarter was as high as 422 million yuan, an increase of 206.94% over the same period last year. As of Q3, the total amount of self-organizing network business orders signed by Q3 company was about 2.5 billion yuan. We believe that the correction of cash flow generated by business activities is the best embodiment of the authenticity of the company's self-organizing network business. Military and police use is the most critical part of domestic substitution, and its market will also be the fastest and most stable landing area of Beidou. It is estimated that the market size will reach 39.5 billion by 2020, and the increment space is obvious. Ad hoc network products can be widely used in military, public safety, emergency scheduling and other fields, and will be the first to be applied. As the company's orders continue to be confirmed, it will greatly increase the company's future performance.
Research and development investment continues to grow high, with the overall layout of the Beidou field.
In order to speed up product innovation and maintain product technology leadership, the company continues to increase R & D investment. From January to September, the company invested 133 million yuan in R & D, an increase of 116.17% over the same period last year. In a single quarter, Q3 invested 71 million yuan in R & D, an increase of 427.62% over the same period last year. As a representative enterprise in the application field of Beidou, the company takes high-precision business as the core, comprehensively arranges the industrial chain of Beidou, and focuses on the industry application market to achieve multi-point blossom. We believe that high-precision positioning is the key factor for the development of Beidou, and the huge market space for industry application provides a soil for growth. At the same time, under the background of the continuous expansion of the market, Beidou needs to show a higher "performance-to-price ratio" in the upstream basic devices if it wants to achieve "integration" to "catch up" with GPS. On the basis of the layout of the whole industry chain and taking the high-precision business as the core, the company will make a breakthrough in the industry application market and create a potential profit growth point for its development.
Profit forecast and investment advice
We expect the company to make a net profit of 419 million yuan, 587 million yuan and 735 million yuan from 2018 to 2020, corresponding to 0.56,0.79,0.99 yuan for EPS and 21.8,15.6,12.4 times for PE, with a target price of 15.3 yuan.
Risk hint: the business space of the autonomous network is limited; the launch of Beidou satellite is not as expected.