Event: on the evening of July 1, the company announced its 2019 half-year performance forecast. in the first half of the year, the company is expected to achieve a net profit of 43 million-48 million, compared with a loss of 52.4816 million yuan in the same period last year.
The company's reported performance turned from loss to profit, mainly due to a substantial increase in revenue from the main business compared with the same period last year. The company expects that the impact of non-recurrent profit and loss on the company's H1 net profit in the first half of the year is about 12.1185 million, while the estimated range of non-return net profit is 3088.15-35.8815 million yuan. Military business: military orders increased during the reporting period, signed an "order contract" with a domestic military unit on December 27, 2018, with an amount of 23.9208 million yuan; on January 23, the company announced the signing of a 110 million yuan contract with a domestic military unit. Of this total, 72.256 million yuan was confirmed in the first quarterly report. According to the quarterly report, the company Q1 added 169 million yuan in scattered orders. The amount of outstanding orders at the end of the first quarter was 73.9673 million yuan. Civil products business: the company's communications electronic products orders increased, production capacity gradually increased, 5G-related products have achieved mass production and sales, communications and electronic business revenue increased significantly during the reporting period.
5G domestic replacement vanguard, annulus & isolator, ferrite faucet. In 2015, the company acquired Huayang Communications and entered the field of civil mobile communications; in 2016, the company acquired Nanjing Biao to strengthen the ferrite material system; at present, the company focuses on the domestic replacement of 5G, focusing on isolators, RF microwave small signal devices, RF single chips and other products, key customers have begun to purchase the company's loops and isolators in bulk, and some products have formed sustained and stable order revenue.
With the application of 5GMassiveMIMO technology, the consumption of annulators and isolators has increased greatly, and the market space will reach several times that of 4G. The requirement of network capacity in 5G era is much higher than that of 4G. Massive MIMO (large scale Antenna) is one of the key technologies to improve network capacity. In order to support this technology, the number of 5G antenna channels will be greatly increased, the number of single sector antenna channels from 4 channels, 8 channels, greatly increased to 64 channels, the increase in the number of channels will double the amount of RF devices. In addition, due to the increase of the working frequency band, the station density of 5G will also be higher than that of 4G. Therefore, in the 5G era, the use of circulators and isolators will increase greatly.
Under the background of the science and technology game between China and the United States, the tide of domestic substitution in the 5G era is irresistible. During the 5G period, domestic enterprises in the industrial chain will continue to make breakthroughs upstream and gradually realize more domestic alternatives in the field of communication and radio frequency. As the first choice of domestic alternatives in related fields, the company will be unstoppable. Tianhe Defense will usher in the great opportunity to participate in the global 5G construction, which is expected to further increase the market share of circulators, isolators and upstream materials.
Investment suggestion: we estimate that the company's income from 2019 to 2021 will be 571 million yuan (+ 116.3%), 1.229 billion yuan (+ 115.3%) and 1.859 billion yuan (+ 51.3%) respectively, and the net profit belonging to the shareholders of the listed company is 103 million yuan, 297 million yuan (+ 188.4%) and 423 million yuan (+ 42.3%), respectively, and the corresponding EPS is 0.43,1.24,1.76 yuan respectively. The corresponding PE was 49 times, 17 times and 12 times, respectively. Combined with the company's future development expectations driven by 5G, we maintain the "buy-A" investment rating and maintain the target price of 25.20 yuan.
Risk hint: the progress of 5G is not as expected, and there is great uncertainty about the revenue progress of military orders in the short term.