Core ideas:

1. The performance in 2019 exceeded expectations. According to the performance of KuaiBao, the company achieved revenue of 1.499 billion yuan in 2019, + 98.7% year-on-year, and net profit of 75.79 million yuan, + 50.68%. The company's performance exceeded our expectations (including projected revenue of 1.136 billion yuan, year-on-year + 50.5%; forecast return net profit of 71.8 million yuan, year-on-year + 42.6%).

two。 Helicopter Health and use Monitoring system (HUMS) is installed in DC 20, the progress may be accelerated. HUMS is the second generation product developed by the company, which is matched with Zhi 20. In the 2019 National Day parade, the straight 20 was unveiled for the first time, and its shortfall was conservatively estimated at 900. Benefit from the acceleration of direct 20-column installation, the company's HUMS installation progress may be accelerated.

3. Raise funds to invest in engine health management system (EHM) research and development, to create the third generation of pillar products, cultivate new growth points. The company issued a preliminary plan in November 2019, planning to issue 250 million yuan of convertible bonds, research and development of EHM system, and create the third generation products after Feishen and HUMS.

4. Automatic testing equipment (ATE) to further expand the military and civilian business. In 2019, the company achieves the delivery of trial orders for the first batch of new military customers, and is expected to obtain more batch orders. In October, the company won the bid 14 million C919 automatic test platform project to achieve a civil breakthrough in ATE and open up room for growth.

5. Maintain the "overweight" rating. It is estimated that the EPS of the company from 2019 to 2021 is 0.32 yuan / 0.37 yuan / 0.39 yuan respectively, and the corresponding price-earnings ratio is 46 times / 39 times / 37 times respectively.

The company's HUMS supporting or accelerating, ATE military and civilian business to further expand, raising funds to create the third generation of new products EHM, good prospects for development, to maintain the "overweight" rating.

6. Risk tips: direct 20 column loading is not as expected; equipment research and development is blocked; civil aviation maintenance market is affected by the epidemic more than expected.