The traditional business is actively expanding, and the new business of 5G is multi-dimensional to promote the new growth. Tianhe Defense started as a military industry. with the increase of state support for the military industry, the company continues to consolidate the stock market of traditional military business while actively opening up new business and new markets, and key model products continue to make new progress. military revenue increased significantly over the same period last year. As for the company's new 5G business, with the gradual development of the 5G market, the company's communications electronics market has achieved a historic breakthrough, and the company's layout of radio frequency chips and circulators will help the company grow in the future.
With the explosion of RF demand in 5G era, domestic replacement Brooks no delay. According to the statistics in the Global Radio FrequencyFront-end Module Market Research Report 2019 report, the global RF front-end market grew at a compound annual growth rate of 13.10% from 2011 to 2018, reaching US $14.91 billion in 2018. Affected by the commercialization of 5G network, from 2020, the global RF front-end market will usher in rapid growth. From 2018 to 2023, the global RF front-end market is expected to continue to grow at a compound annual growth rate of 16.00%, approaching US $31.31 billion in 2023. However, in such a surge in the market, domestic RF devices have made little progress in domestic substitution in 5G base stations or 5G mobile phones, and the market is mainly occupied by overseas leading manufacturers.
The subsidiary Chengdu Flux has laid out RF chips for a long time, gradually breaking through the RF no man's land. After years of painstaking efforts in the RF industry, Chengdu Flux, a subsidiary of Tianhe Defense, has achieved a breakthrough in a number of domestic RF single chips, and at this stage, some models have been supplied in bulk to different customers. In addition, Chengdu Flux has also been tested continuously in Huawei and ZTE, and has passed the preliminary examination of Datang and ZTE. With the current 5G demand for RF devices surging, and Chengdu Tongyu layout of this field for several years on the basis of a certain breakthrough, we expect that with Chengdu Tongyu continuous breakthrough, is expected to truly enter the RF domestic uninhabited area.
From the financial situation of Chengdu Tongyu, while the company's revenue increased significantly in 2019, the loss of Chengdu Tongyu's net profit in 2019 also got a better reduction. With the continuous breakthroughs of RF chips, the company is expected to establish a new driving force for its growth in the RF field in the future.
The outbreak of the industry + domestic substitution, the company has obvious advantages in upstream layout. Industry explosion: with the large-scale construction of 5G in 2020, the number of base stations has increased significantly. At the same time, due to the increase in the number of channels in 5G base stations, the amount of circulators and isolators has increased significantly, from 4 channels and 8 channels in the 4G period to 64 channels, and the number of single base stations has reached 192. Domestic substitution: the previous leading manufacturers of rings are American and Japanese manufacturers such as skyworks, molex and TDK. In recent years, with the withdrawal of the United States and the tide of domestic substitution, the transfer trend of communication rings to the domestic industry is obvious; upstream layout: the company has a good layout in the rings and upstream rotating magnetic ferrites, and has obvious advantages among domestic manufacturers.
Profit forecast and investment advice: fully prepared for 5G, the circulator achieves stable income, enters the burst stage, the RF chip continues to advance, and the domestic replacement of the core key chip is laid out. On the basis that the subsidiary Chengdu Flux has completed the research and development of a number of domestic alternative chips covering the mainstream communication frequency band and realized batch supply, the company's key customers have purchased the company's circulators, isolators and other communication device products in bulk, and some of the products have formed a sustained and stable order revenue, so we expect the company to achieve an income of 20.80 trillion RMB in 2020-2022. Realize the net profit of 3.51 pound 506 shock 702 million yuan, and the corresponding PE is 32.3 shock 22.4 shock 16.2x, maintaining the "buy" rating.
Risk hint: 5G construction progress is not as expected, collection share is not as expected.