Main points of investment:
Event: the company released its annual report in 2019. In 2019, the company realized operating income of 495 million yuan, an increase of 20.86% over the same period last year; net profit belonging to shareholders of listed companies was 98 million yuan, an increase of 0.11% over the same period last year; and non-net profit was 50 million yuan, an increase of 170.89% over the same period last year.
Comments:
Capacity expansion of prefabricated fragments. The company's prefabricated fragment business is undertaken by Shenyang Haneng, a holding subsidiary. Shenyang Haneng has military industry-related qualifications, mainly responsible for the research, development and manufacture of various specifications of tungsten alloy prefabricated fragments, the product series covers tungsten columns, tungsten rings, tungsten balls, etc., mainly used in the field of national defense science and technology. The revenue of prefabricated fragments in 2019 was 120 million yuan, an increase of 24.33% over the same period last year, and the gross profit was 53 million yuan, an increase of 120.00% over the same period last year. In March 2019, the company acquired a 25% stake in Shenyang Haneng, holding a total of 70%, and obtaining an absolute holding position. it has further strengthened the comprehensive strategic cooperation with large military industrial groups in the integration of business resources and high-quality military assets, which has a positive impact on improving the company's sustainable profitability.
Sugar cycle upward, sugar business gross profit margin is expected to increase. The company mainly carries on the trade of white granulated sugar, and the sales area is mainly in South China. Due to the reduction of production in major sugar producing countries such as Brazil, India and Thailand, global sugar prices are expected to rise steadily in 2020, and the company's sugar trade gross profit margin is expected to increase. The price of sugar in the free market in February was 15.07 US dollars per pound, up 16.55% from a year earlier. The company strives to open up sugar trade purchase and marketing channels, and actively explores a variety of business models, such as entrusted processing trade, raw sugar (overseas) trade, green seedling sugar trade and so on.
The sublimation power supply is incorporated and the gross profit margin is increased. In 2019, the company was merged into the subsidiary sublimation power supply, and the gross profit margin of sublimation power supply was as high as 80.27%, driving the company's sales gross profit margin of 23.81% to 32.13%. The revenue of power supply in 2019 was 116 million yuan, an increase of 23.44% over the same period last year. During this period, Sichuan Ganhua Power Technology Co., Ltd., a wholly-owned subsidiary, was set up to focus on power technology research and development, trial production, and strive to enhance the company's independent innovation capability and further deepen the field of module power supply.
Investment suggestion: the company's business covers military industry, sugar trade, power supply, military business control system, sugar business gross profit margin is expected to rise with sugar prices. We expect the company's earnings per share in 2020 / 2021 to be 0.240.27 yuan per share, respectively, and the current share price is 25.1 times PE, giving the company a "cautious recommendation" rating for the first time.
Risk tips: a reduction in the number of military orders, a sharp decline in sugar, a decline in gross profit margin of power products caused by the epidemic and so on.
