Event: The company announced on April 28 that 2019 revenue was 928 million yuan (+19.17%), net profit of 143 million yuan (+14.35%), gross profit margin 32.32% (-0.49pcts), net profit margin 15.43% (-0.65pcts); 2020 Q1 revenue of 89 million yuan (+16.22%), net profit of 8.3542 million yuan (+1.35%), gross profit margin of 30.52% (-10.91pcts), net interest rate 9.43% (- 13.83 pcts).
Key points of investment:
The major asset restructuring came to a successful conclusion, and the company's net profit grew steadily. In 2019, the company's major asset restructuring came to a successful conclusion. The transaction was an enterprise merger under the same control. The transaction targets Xuanyu Space and Xuanyu Intelligence were included in the consolidated statement, leading to the expansion of the company's business scale and increased profitability. Compared with the company's adjusted 2018 financial statements, the company's operating income ($928 million, +19.17%) and the return on net assets (+14.35%) achieved steady growth, and the return on net assets (weighted) reached a steady growth rate of return on net assets (weighted) 18.30% (+2.99pcts), a new high since the company went public. Among them, the company's railway safety inspection, maintenance and intelligent storage system business revenue (315 million yuan, +0.86%) and gross profit margin (39.76%, -0.96pcts) basically remained fluctuating within a small range; the revenue from the measurement and control simulation and microsystem business mainly came from the subsidiary Yu Space injected by the company in 2019, benefiting from the overall development of the aerospace and military industry. The company's business revenue (459 million yuan, +28.08%) and gross profit margin (29.34%, +2.01pcts) maintained rapid growth; the nuclear industry and special environment The revenue from the intelligent equipment system business mainly comes from Xuanyu Intelligence, a subsidiary that the company injected in 2019. The business revenue (153 million yuan, +42.60%) achieved rapid growth, while the gross profit margin (26.01%, -2.08pcts) declined slightly. As can be seen, in 2019, the company's measurement and control simulation and microsystem business, and the nuclear industry and special environment intelligent equipment system business grew rapidly. The two new businesses have now become the company's new revenue growth points. Due to an increase in the revenue share of nuclear industry and special environment intelligent equipment system products with low gross margins (16.56%, +2.72pcts), the company's overall gross profit margin (32.32%, -0.49pcts) declined slightly.At the same time, the company's subsidiary Xuanyu Space's net profit performance promises for 2020 and 2021 were 84 million yuan and 98 million yuan respectively, and Xuanyu Intelligent's net profit performance promises of 2020 and 2021 were 102 million yuan and 27 million yuan respectively. We believe that both companies exceeded their performance promises in 2019, and that revenue growth remained at a high level. The future will lay a solid foundation for the company's net profit growth.
The operating income of the company in Q1 2020 (89 million yuan, +16.22%) continued the steady growth in 2019, while the net profit returned to the mother (83542 million yuan, +1.35%) was basically the same as the same period in 2019. We believe the main reason was that the main customers of the company's new measurement and control simulation and microsystem business in 2019, the nuclear industry and intelligent equipment systems business for special environments were enterprises and institutions belonging to military central enterprises such as Aerospace Technology, Aerospace Science and Industry, and CNNC. Some military products settlement with high gross margins generally had seasonal factors. We It is expected that after centrally confirming revenue for this part of the product in the fourth quarter, the company's net profit returned to the mother for the full year of 2020 will resume steady growth.
In terms of expenses, the company's management expenses ratio (5.20%, -0.68pcts) declined against the backdrop of a steady increase in the company's revenue, indicating that corporate governance contributed to an increase in the company's profitability. In terms of cash flow, due to the company's good operating conditions in 2019 and the use of commercial credit to improve the efficiency of capital use, the net cash flow generated by the company's operating activities (71 million yuan, +129.14%) increased significantly.In terms of other financial data, the company's inventory book value (440 million yuan, +21.21%) grew rapidly at the end of 2019. Among them, the book value of the product (282 million yuan, +61.45%) grew the highest. We think this was due to the company's 2019 operating income that achieved steady growth and increased its inventory preparation efforts in 2020. The company's inventory book value in Q1 2020 was 473 million yuan. We think this was due to delays in the delivery of some products due to the impact of the COVID-19 pandemic in early 2020. With the gradual improvement of the domestic epidemic, we expect the company's inventory to be realized to the company's performance in the second half of 2020. In terms of accounts receivable, the company's accounts receivable (519 million yuan, +34.37%) grew rapidly at the end of 2019, and Q1 2020 continued to rise to 534 million yuan. We believe that the main reason was that the company's new revenue growth rate in 2019, the main customers of the measurement and control simulation and microsystem business application business, the nuclear industry and special environment intelligent equipment system business were enterprises and institutions belonging to military central enterprises such as aerospace technology, aerospace science and industry, and CNNC, which were affected by the long internal approval procedures of such customers and the special settlement model for military goods, which led the company to respond Accounts receivable are growing rapidly, but as a listed company belonging to the Aerospace Science and Technology Group, the company's customers are mainly state-owned enterprises. We expect that repayment will be guaranteed, and the risk of bad debts will be low.
Market demand for the company's three major businesses may all achieve rapid growth, which is expected to help improve the company's performance steadily in 2020. The company belongs to the Space Technology Research Institute under Aerospace Science and Technology Group Corporation. After completing major asset restructuring in 2019, the company formed three major business segments based on control technology for railway vehicle operation safety inspection and maintenance and intelligent storage systems, intelligent test simulation systems and microsystems and control components, and nuclear industry automation equipment systems.
① Railway vehicle operation safety inspection and maintenance and intelligent storage system business In terms of railway vehicle operation safety inspection and maintenance, the company mainly targets the domestic rail transit market, including national railways and urban rail transit. The railway vehicle infrared shaft temperature detection system (THDS system) series products developed by the company have been widely used by 18 railway administration group companies and local railway joint ventures. By the end of 2019, the company's total THDS product holdings had reached 2,890 sets, with a market share of more than 40%. The dynamic image detection system for railway vehicle operation faults had achieved major changes in railway inspection operations. Currently, more than 360 sets of products have been promoted and used in the field of intelligent warehousing; in terms of intelligent warehousing, the company's products are used in new construction in the field of rail transit maintenance The intelligent upgrading and capacity expansion of equipment has been promoted and applied to major EMU maintenance bases and various high-power locomotive maintenance bases. Among them, the 10-ton heavy-duty intelligent storage system has obtained the only domestic patent. In the national market competition for the intelligent three-dimensional EMU steering frame project, it is the only manufacturer with technical qualifications, and the company has monopolized the domestic market business for this type of product. In 2019, the company's three-dimensional library products completed projects such as the Beijing aircraft terminal wheel-to-three-dimensional library; the information-related business completed projects such as the 5T centralized monitoring center and integrated application system.
On April 26, 2020, according to a report by the China Business Daily, up to now, according to incomplete statistics, the country's railway fixed asset investment in 2020 has exceeded 815 billion yuan, and the total annual investment is expected to exceed 820 billion yuan. According to statistics, the country's railway investment has exceeded 80 billion yuan for 6 consecutive years, and 2020, the year the 13th Five-Year Plan ended, the country's railway investment reached a record high. Meanwhile, in 2019, China added 968.77 kilometers of urban rail transit operating lines, an increase of 32.94% over the previous year, a record high. Based on the above facts, we believe that the opening of new mileage and the purchase of new vehicles brought about by increased railway investment will drive the demand for railway vehicle safety inspection system configuration, and that the new construction of domestic urban rail transit operations will also bring more demand for intelligent upgrades and capacity expansion and transformation to the company's intelligent warehousing business. The company's railway vehicle operation safety inspection and maintenance and intelligent storage system business revenue is expected to resume steady growth in 2020.
② In terms of intelligent test simulation systems and microsystem and control component business intelligent test simulation systems, the company's products are mainly used in complex intelligent equipment fields such as aerospace. It successfully won the bid for vacuum container and heat sink development projects in 2019, achieving the company's breakthrough in large-scale vacuum ring model performance, successfully passed the audit by the Xingyuan Certification Center, and became a qualified supplier for CNNC. At the same time, the company undertook various intelligent production line projects such as thruster assembly and testing intelligent production lines; in terms of microsystems and control components, the company's products include modular and integrated microsystems, high-density integrated lightweight and miniaturized control components based on microsystem technology, and control systems for complex intelligent equipment such as aerospace. In 2019, the company successfully won the bid for the public tender project of the State Grid ICT Industry Group and was officially incorporated into the national grid supply system. In terms of core components, the company completed the development and delivery of a series of related products from the First Academy of Aerospace Science and Technology Group, obtained optical sensor support product development tasks from Ocean University of China, and entered the field of marine hydrometeorology for the first time.
According to China Aerospace News, in 2019, the Aerospace Science and Technology Corporation completed 27 launch missions of the carrier rocket and launched 43 satellites into the scheduled orbit, 38 of which were developed by the Aerospace Science and Technology Corporation. We believe that as a platform for listed companies in the field of intelligent equipment in the field of intelligent equipment, the company's intelligent test simulation system and microsystem and control component business is closely related to the development of launch vehicles and spacecraft in China. Currently, the Aerospace Science and Technology Group has announced that in 2020, its space launches are expected to exceed 40 times, and will launch more than 60 spacecraft at the same time, all reaching record highs, which will drive demand for the company's intelligent test simulation system and microsystem and control component business. Furthermore, the business has already begun to expand into applications related to the nuclear industry and national power grids in 2019, which is expected to form new applications. In terms of the incremental market, in summary, we expect the company's intelligent test simulation system and microsystem and control component business to achieve rapid growth in 2020.
③ Nuclear industry automation equipment sector
In terms of automation equipment for the nuclear industry, the company is mainly engaged in R&D, production and sales of automation equipment products that can be operated remotely in special environments. The core products are special operation robots, including intelligent precision assembly systems, hot chamber automation platforms, glove box automation platforms, key radiation-resistant components (cameras, controllers, drivers), and detection robot systems. In 2019, the company successfully won the bid for the post-processing inspection and repair container engineering prototype scientific research project, laying a solid foundation for obtaining subsequent post-processing engineering tasks. At the same time, it implemented technical pre-research topics in military and medical robotics. It is expected to open up markets in new fields such as medical intelligent equipment in the future.
According to the “National Nuclear Power Development Special Plan 2005-2020”, China's nuclear power and special equipment industry will achieve large-scale and rapid development. In the field of special environmental applications, such as high temperature, high radiation, and high corrosion environments, there is an urgent need for robots to replace labor. As China is vigorously promoting the systematization, informatization and autonomous development of high-end equipment, demand for robots and intelligent equipment in this field will increase dramatically in the future. The company revealed that its subsidiary Xuanyu Intelligence has a certain market popularity and industry position in the nuclear industry, and has accumulated rich engineering experience. By completing a number of intelligent equipment projects, it has formed business specifications such as project design, quality management, and resource assurance. Therefore, we expect that with the rapid development of the nuclear industry in the next few years, the company's market expansion in the nuclear industry automation equipment will continue to accelerate.
Note: Since the actual controller of the company and the company subject to the asset restructuring transaction completed in 2019 are the same Aerospace Science and Technology Group, this transaction is an enterprise merger under the same control. The company has adjusted the financial data for 2019 and 2018, which is different from the 2019 quarterly report and semi-annual report disclosed by the company. To ensure comparability, the 2019 financial data and 2018 financial data involved in the analysis of this report are all financial data adjusted by the company in the company's 2019 annual report.
Investment advice
We believe that as an industrial development platform, institutional mechanism innovation platform, and asset securitization platform in the field of intelligent equipment of the Fifth Academy of Aerospace Science and Technology Group, the company has accumulated deep technology. The end of major asset restructuring in 2019 expanded the company's business to the aerospace and nuclear industry. With the gradual improvement of the current domestic epidemic, the company's large inventory may be realized to performance in the year the 13th Five-Year Plan comes to fruition; the continued growth of China's railway vehicle investment and the new construction of urban rail transit operations is expected to stimulate the company's railway vehicle operation safety inspection and maintenance and smart storage system business to resume the company's business. Growth trend; Aerospace Science and Technology Group's record number of launch plans in 2020 and the company's expansion in the nuclear industry and national grid-related application fields will be a strong guarantee for the company's test simulation systems and microsystem and control component business to achieve continuous rapid growth; the company's nuclear industry automation equipment business is expected to benefit from the large-scale and rapid development of China's nuclear power and special equipment industry; the company maintains a decline in management expenses in a state of revenue growth, which indicates that the company's profitability has increased.
Based on the above views, we expect the company's revenue for 2020-2022 to be 1,207 million yuan, 1,508 million yuan and 1,848 million yuan respectively, net profit of 174 million yuan, 208 million yuan, and 245 million yuan respectively. EPS is 0.24 yuan, 0.29 yuan, and 0.34 yuan respectively. The current stock prices correspond to 54 times, 45 times and 38 times PE respectively.
Risk warning: The company's nuclear industry automatic equipment marketing fell short of expectations; aerospace product technology development cycle is long.