This report is read as follows:
In 19 years, due to the fluctuation of the munitions market, the company's revenue declined slightly, while the 2020Q1 income affected by the epidemic declined. In the future, the company will continue to open up the civilian products market, consolidate its leading position in munitions supply, and maintain its overweight rating.
Main points of investment:
Maintain cautious overweight rating: taking into account the impact of the epidemic on the company's product sales, downgrade the EPS to 0.07 (- 0.03) / 0.07 (- 0.05) / 0.08 yuan in 2020-2022, taking into account the company's active development of the civilian market, with reference to comparable industry, 53 times PE in 2020, lowering the target price to 3.72 yuan.
After 19 years of turning losses into profits, the income of 20Q1 affected by the epidemic has declined, which is basically in line with expectations. The company achieved revenue of 21.154 billion in 19 years, down 6.72% from the same period last year, and the net profit from the sale of its subsidiaries turned into a profit of 62.6 million. In 2019, the company was affected by military reform and military inventory digestion, military orders declined, and military revenue fell by 26.73% to 3.312 billion. However, the company increased its contracting efforts for civilian products, and the orders for civilian products increased rapidly. In 19 years, the company's revenue from civilian products decreased slightly by 3.23% to 8.679 billion. Affected by the epidemic, 20Q1's revenue fell 41.65% year-on-year to 2.599 billion, while net profit increased 64.37% year-on-year to 26.39 million yuan, basically in line with expectations.
The gross profit margin is basically flat and the operating capacity is stable as a whole. In 19 years, under the influence of the fluctuations in the munitions market, the company further adjusted its strategy and took the initiative to reduce its low gross profit margin business, and the gross profit margin remained unchanged as a whole. In order to expand the export business, the agency fee and storage fee continue to increase, resulting in an increase in sales expenses 0.36pct to 2.59%. At the same time, the company sells idle assets, increases the withdrawal of funds, and the financial expenses are reduced to 0.58% by 0.34pct, and the overall expenses can be controlled.
We will continue to open up the civilian products market and consolidate the core position of military supplies suppliers. Since the epidemic, the company's product sales have been affected, but the company has actively participated in the production of epidemic prevention materials and contributed to revenue growth.
In the future, the company hopes to continue to open up the civilian products market, promote the "trinity" marketing operation mechanism, consolidate the leading position of munitions, and it is expected that the income will resume growth in the future.
Risk hint: the income of the main business fluctuates and the new business expansion falls short of expectations.
