Lower-than-expected performance in 2019
The company announced its 2019 results and 1Q20 results: 2019 operating income 1.125 billion yuan, YOY + 13.15%; return to the mother net profit 137 million yuan, YOY + 0.19%; deduction of non-return net profit 102 million yuan, YOY-8.56%. 1Q20 revenue 133 million yuan, YOY-23.25%; return to the mother net profit of 18 million yuan, YOY + 14.7%. The 19-year performance was lower than we expected, mainly due to the amortization of equity incentive expenses and the lower-than-expected development of vehicle millimeter wave radar business.
1Q20's annual performance is in line with our expectations.
During the period, the expense rate was stable and the gross profit margin increased slightly. 1) in 2019, the company's sales, management, R & D and financial expense rates were 2.4%, 14.29%, 10.84% and 1.24% respectively, with year-on-year changes-0.09ppt,-1.69ppt, + 1.59ppt, + 1.27ppt, which are basically stable. 2) the company's gross profit margin was 44% in 2019 and 43% in 2018, slightly higher than the same period last year.
It is worth noting that the company's current asset-liability ratio is not high, 19.46% in 2019.
The operating cash flow has greatly improved compared with the same period last year. The net operating cash flow of the company in 2019 was 105 million yuan, which was positive for two consecutive years, and there was a great improvement over 25 million yuan in 2018.
Trend of development
It has strong R & D capability and diversified business. 1) Industrial background: at present, the company's business is mainly undertaken by subsidiaries such as Science and Technology Reike, Xi'an Qiwei, Chengdu Aicote, etc., and has established a deep industry-university-research cooperative relationship with Beijing Institute of Technology and China Arms Industry Corporation. 2) Business direction: the company's current business includes radar systems, intelligent ammunition, satellite applications, secure storage, intelligent network connection five directions. Among them. The company's satellite application business mainly includes: on-board real-time processing key equipment, satellite remote sensing ground station channel equipment, Beidou navigation baseband chip / module / whole machine and application system, etc. In the intelligent network connection business, based on the existing key technologies of sensing and information processing, the company has developed the intelligent roadside subsystem of the self-driving intelligent network connection system, which can obtain the location, speed, attributes and other information of road people, vehicles, objects and other targets in real time, upload the cloud platform and distribute them to intelligent cars in real time.
Profit forecast and valuation
Based on the impact of the epidemic on the company and the company's current business direction and other factors, we reduced the company's 2020 net profit by 33% to 164 million yuan, and introduced a net profit of 200 million yuan in 2021. The company's current share price corresponds to a price-to-earnings ratio of 53 times / 44 times 2020 pound 2021.
We believe that the company has strong R & D capability and strong industrial background. Taking into account the current valuation level, temporarily maintain the neutral rating and target price 7.12 yuan unchanged (downside space 12%), corresponding to 47 times / 40 times 2020max 2021 price-earnings ratio.
Risk.
Intelligent Internet connection business development is not up to expectations, orders and delivery uncertainty and so on.