Event: the company announced on April 17 that its 2019 revenue was 2.734 billion yuan (+ 1.49%), its net profit was 446 million yuan (+ 6.73%), its gross profit margin was 39.88% (- 4.07pcts), and its net profit rate was 25.23% (- 2.44pcts).
Main points of investment:
The company achieved steady revenue growth, depreciation of newly launched satellites and other factors led to a decline in gross profit margin during the reporting period, the company's operating income was 2.734 billion yuan (+ 1.49%), the overall maintained steady growth, mainly due to the steady growth of revenue in the company. at the same time, the increase in high-throughput satellite business. The company's gross profit margin (39.88% sperm 4.07pcts) declined, mainly due to the increase in accumulated depreciation, measurement and control fees and operating expenses caused by the company's new launch of China Star 6C satellite in 2019, resulting in operating costs (1.644 billion yuan, + 8.86%) growing faster than revenue growth.
In terms of expenses, due to the increase in personnel due to the company's business development, labor costs increased, and the company's management expenses accounted for a significant increase in revenue (9.79% score 1.25pcts). At the same time, the company increased its R & D investment in satellite application-related R & D projects, with R & D expenses reaching 75 million yuan (+ 39.85%). At the end of the reporting period, the company's monetary funds reached 4.086 billion yuan, an increase of 55.62% over the end of the previous period, mainly due to the receipt of listed funds and insurance reparations for the failure of the Zhongxing 18 satellite project.
The competition in the global satellite communications market is fierce, and the revenue of the company's satellite communications operation service business has maintained steady growth.
The company is the core professional subsidiary of China Aerospace Science and Technology Group Co., Ltd., which is engaged in satellite operation service industry, and has national basic telecommunications service operation license and value-added telecommunications service operation license. It is the only satellite communications operator in China that has communications satellite resources and can be controlled independently. The company's main business is satellite space segment operation and integrated information services and other related application services. By the end of the reporting period, the company operated and managed 15 commercial communications and broadcasting satellites, with satellite transponder resources covering C-band, Ku band and Ka band, making it the second largest fixed communications satellite operator in Asia and the sixth largest in the world.
From the point of view of the distribution of the company's revenue, the company's overseas business revenue fell 5.90% in 2019 compared with the same period last year, and the gross profit margin fell 7.54% compared with the same period last year. The company's subsidiary in charge of overseas satellite operations, Asia-Pacific Satellite, disclosed that the decline in revenue and gross profit margin was due to the continued downturn in the global and Asia-Pacific satellite transponder market in 2019, weak demand growth in satellite radio, television and satellite communications business, and oversupply led to a sharp decline in the rental cost of communications satellite transponder bandwidth. At the same time, Asia-Pacific Satellite expects that the overseas transponder market will still be in a state of oversupply in the future. In contrast to the domestic market, different from the decline in overseas business income, the company's domestic income reached 1.787 billion yuan (+ 5.90%) in 2019, continuing the steady growth trend of the past three years. We believe that on the one hand, the communication satellite operation industry in China has certain entry barriers and preconditions (such as prohibition of foreign participation), and on the other hand, under the background of traditional C-band resource supply exceeding demand, the company launched Zhongxing 16 high-throughput communications satellite in 2017. This launch is the first time that China has put high-throughput satellite resources into commercial applications. It has successfully expanded the market scale of satellite communication service in our country.
The failure of the China Star 18 project is difficult for the company to continue its layout in the field of high-throughput satellite business, and the Asia-Pacific 6D satellite launch is expected to change the downward trend of the company's overseas business.
In August 2019, the China Star 18 satellite was successfully launched from the Xichang Satellite launch Center. The separation of the satellite and arrow was normal, but the operation of the satellite was abnormal. The ownership and risk of the China Star 18 satellite will be transferred to the company from the time of launch. The company announced in November 2019 that it had failed to establish an effective connection with the China Star 18 satellite, and the possibility of establishing a subsequent connection with the satellite was very low, and even if the connection was re-established, the satellite did not have normal communication service capacity. As of December 31, 2019, the company had received insurance compensation of US $250 million, and the company disclosed that the insurance compensation for the China Star 18 satellite would be used for follow-up satellite resources construction projects.
We believe that although the failure of the China Star 18 project will delay the layout of the company's high-throughput satellite business, at a time when the traditional satellite transponder leasing market is in a state of oversupply, the company's direction of continuing to expand high-throughput satellite business will not change. In March 2020, the Aerospace Science and Technology Group disclosed that the five Institutes of Aerospace Science and Technology were the first star of the Asia-Pacific Star's global high-throughput broadband satellite communication system. Asia-Pacific 6D high-throughput communications satellite (Asia-Pacific 6D satellite invested by the company and Asia-Pacific Satellite's domestic associate, Asia-Pacific Star) through factory pre-evaluation, plans to launch in 2020. We expect that the launch of the Asia-Pacific 6D satellite will be an important step in the company's global layout of its high-throughput satellite business and is expected to improve the decline in revenue from overseas satellite communications operations.
Steadily promote the construction of industry application platform, high-throughput satellite ocean service products have been launched at present, in addition to consolidating the traditional transponder rental market, the company has begun to accelerate the development of new business and steadily promote the construction of industry application platform. In terms of existing business, the company disclosed that during the reporting period, the domestic satellite radio and television business remained generally stable, realizing the coverage of TV programs in some provinces and cities in the South China Sea and the backup of every village business. At the same time, the company made great efforts to develop radio and television transmission satellite incremental business, high-definition satellite programs made new progress, communications business also maintained sustained growth, excellent completion of the relevant emergency communications security work. Overseas, the company has made great efforts to develop new markets in Southeast Asia, Europe and other regions, obtained new business users, and achieved the expansion of key projects.
In terms of new business development, the company began to steadily promote the construction of industry application platforms, especially in shipboard key markets. On April 11, 2020, the Aerospace Science and Technology Group disclosed that the company's subsidiary Xin Nuo "Hai Xingtong" high-throughput satellite ocean service products have been officially launched, which makes use of Zhongxing 16 satellite resources and can provide high-speed broadband communication services. To provide higher quality marine satellite communications services for different types of ships, to help optimize and upgrade the marine satellite communications industry, we believe that the launch of this product is also expected to become a new revenue growth point for the company in 2020.
Investment suggestion
We believe that, as the sixth largest fixed communications satellite operator in the world, relying on its advantages in satellite resources and technological competitiveness in the domestic satellite communications industry, the company is expected to help the company become a leader in the domestic satellite communications industry; although the China Star 18 project has failed, it is difficult for the company to continue its layout in the field of high-throughput satellite business, and the launch of Asia-Pacific 6D satellite is expected to change the declining trend of the company's overseas business. The company actively promotes the construction of industry application platform, and the promotion of "starfish pass" products is expected to open up new performance growth points for the company.
Based on the above point of view, we estimate that the operating income of the company from 2020 to 2022 will be 2.841 billion yuan, 3.04 billion yuan and 3.315 billion yuan respectively, the net profit will be 453 million yuan, 484 million yuan and 528 million yuan respectively, and the EPS will be 0.11,0.122,0.13 yuan respectively. The current share price corresponds to 148,136,125 times PE respectively.
Risk hints: there is a risk of failure in satellite launch; there is a risk of failure in satellite work in orbit; and the development of satellite communications markets at home and abroad is not as expected.