Event: the company announced on August 7 that its operating income for the first half of 2020 was 139 million yuan (- 28.89%), its net profit was 50.8249 million yuan (- 13.72%), its gross profit margin was 78.26% (+ 2.93pcts), and its net profit rate was 35.80% (+ 5.88pcts).
Main points of investment:
Affected by the epidemic, the company's revenue and profits both declined, and the gross profit margin reached an all-time high in the same period: the operating income and net profit of returning home in the first half of 2020 decreased compared with the same period in previous years, mainly due to the impact of COVID-19 's epidemic situation. The time for the company and upstream and downstream enterprises to resume work is delayed, especially on-site military inspection, product transportation and customer acceptance are greatly affected by prevention and control measures. At present, the company and the upstream and downstream have fully resumed work, as the epidemic has been effectively controlled, the market has gradually recovered, the company's production and operation is gradually improving.
During the reporting period, the company's gross profit margin reached a record high of 78.26% (+ 2.93pcts), with operating costs of 30.2249 million yuan (- 37.35%) and sales costs of 2.7045 million yuan (- 35.50%), mainly due to fluctuations in product structure and delivery time and a decline in some labor costs. Currency funds accounted for 44.69% (+ 18.90%) of total assets, mainly due to the maturity and redemption of some financial products. The sales income of the top five customers accounted for 92.89% of the operating income, and the company's main source of income was single, including hanger follow-up system and turret follow-up system; the net accounts receivable was 318 million yuan, accounting for 20.22% of current assets. At the same time, the company made provision for various impairment provisions totaling 18.6537 million yuan, of which the credit impairment loss was 7.3073 million yuan, including the bad debt loss of notes receivable, accounts receivable and other receivables, and the inventory decline loss of 11.3464 million yuan. it is mainly due to a large number of entrusted research and development projects and a large amount of provision for inventory decline in some projects.
The company's main business is divided into airborne equipment and technical services and other categories. Of this total, the operating income of airborne equipment was 135 million yuan (- 28.42%), which was mainly affected by the delayed delivery of products affected by the epidemic; the technical services and other operating income was 4.4831 million yuan (- 40.65%), mainly due to the delay in the delivery of maintenance products and the slow down of contract signing. In terms of market, revenue in Northeast China (- 97.29%), Northwest China (- 53.56%) and Southwest China (- 99.66%) decreased significantly compared with the same period last year, mainly because the in-plant military inspection, transportation and delivery progress of products in this region were greatly affected by the epidemic, while orders and delivery increased in North China (+ 798.99%) and East China (+ 86.09%) compared with the same period last year.
Military helicopter airborne equipment has a leading position, some products are the only suppliers: the company is in a leading position in the field of helicopter airborne equipment, and is the only supplier of military aircraft hanger follow-up system and turret follow-up system in our country. The company focuses on the R & D and production of helicopter servo drive technology, high-precision transmission technology and video processing technology, has independent intellectual property rights of military all-digital AC servo technology, and the products developed are innovative.
Airborne equipment category: at present, it mainly includes airborne suspension / launcher products, aircraft information management and recording system products and military autonomous controllable computer products. The proportion of business income of airborne suspension / launcher products in all product categories has been maintained at more than 70% over the years, including hanger follow-up system, turret follow-up system, steering gear system, electric sound winch, buoy delivery device, radar antenna receiving and releasing device and electric folding system, etc. Among them, the hanger servo system and turret servo system have been assembled and mass produced, while other products are still in the development or delivery stage, which is expected to bring increments to the company in the future.
Technical services and others: according to the entrustment of users, mainframe manufacturers, mainframe supporting manufacturers or scientific research institutes, the company provides scientific research, development, testing and other services, which may bring follow-up product sales revenue and further cooperation opportunities. At the same time, the company also provides integrated testing and support system products, a small number of airborne equipment testing, maintenance and other services.
Military products have the advantage of starting first, and military equipment is growing steadily: the company is one of the first private enterprises to participate in the scientific research and production of military helicopter supporting systems, focusing on the R & D and production of military airborne equipment. Up to now, the company's products are mainly sold in the form of military products, and the end users are mainly the domestic military. The company is in the aviation airborne equipment industry chain, upstream is electronic components and mechanical processing, belongs to the fully competitive industry, so that the company in the supply side can reduce costs; downstream are the major mainframe manufacturers, as well as the military and other end users. The company is a second-and third-class matching factory, and most of its customers are superior matching factories and whole machine factories under the Aviation Industry Group. In the relevant military market, the company's customer base is stable, the first-mover advantage is obvious, and the market position is prominent. At present, the company's main military models have been officially installed, with the replacement and addition of supporting products during service, the company is expected to obtain continuous orders.
The company's revenue source is mainly military products, and there is a certain relationship between the number of orders and the military expenditure plan. From 2011 to 2020, China's defense budget grew at an average annual rate of 9.37%. Defense spending in 2020 is estimated to be 1.268005 trillion yuan, an increase of 6.6 percent. In 2019, China's defense expenditure accounted for 9.41% of the world's total defense expenditure, ranking second, far lower than the 24.01% of the United States, and has more room for improvement. Airborne equipment is one of the three major components of aircraft, accounting for about 40% of the value. With the continuous progress of China's military reform and modern air force construction, China's growing military expenditure provides a guarantee for the accelerated assembly of military aircraft, and supporting airborne equipment is expected to continue to grow.
The new product is expected to become a growth point in the future, with a comprehensive layout of land, sea and air: the company's advantage lies in its focus on automatic control technology, servo drive technology and other high-tech research and development, and a high level of gross profit margin. Core products have a first-mover advantage in the field of military airborne equipment and have occupied a favorable position in the corresponding market. In addition to the R & D and mass production of existing mature products, in terms of new business, products such as buoy delivery devices, radar antenna receiving and receiving devices and electric hoists are expected to bring stable and sustained revenue in the next five years. The continuous development of aircraft information management and recording system products such as new video recorders and cameras, and comprehensive testing and support products such as new comprehensive test equipment, portable test equipment and mobile integrated testing vehicles, it is expected to achieve mass production in the next 10 years, driving the growth of the company's operating revenue.
At present, the company's business is concentrated in the field of helicopters assembled by the Army. in order to broaden the application scene of its products, it is expected that it will gradually cover airborne platforms such as armed helicopters, shipborne helicopters, special aircraft and drones in the future. at the same time, enter the air force and navy market with large aircraft ownership, more increment and more space. In the first half of 2020, the company undertook the research and development of a certain type of UAV dual-redundancy locking electric strut and all-electric cabin door drive device; in the field of fixed-wing aircraft, a certain type of aircraft plug-in product device developed by the company is expected to be finalized and transferred to production within this year; in the naval field, the company has undertaken the development of a certain underwater propulsion high-power motor and control system, and is expected to deliver the prototype this year. At the same time, the company and Beijing Heguang Fangda Technology Co., Ltd. jointly funded the establishment of Tianjin Xinfang near Space Science and Technology Co., Ltd., which intends to engage in the research and development of near space vehicles and related products, including the development and production of skin materials for near space airships, the design and production of near space vehicle control systems, motor power systems, power systems and other adjacent space vehicles related products.
Investment suggestion: the company focuses on military airborne equipment and develops new products and new areas while maintaining a stable and incremental batch production business. There is new growth potential in the future. (1) the company's core products have a first-mover advantage in the field of military airborne equipment, and some products are the only suppliers, occupying a favorable position in the market; (2) China's national defense budget is rising steadily, under the needs of military reform and modern air force construction, the demand for airborne equipment will increase with the installation of military helicopters. (3) the company actively develops new products of all kinds of airborne equipment, new models such as fixed wings and drones, and three major services, such as sea, land and air services, and continues to expand product categories and application scenarios.
We predict that the net profit of the company in 2020, 2021 and 2022 will be 162 million yuan, 174 million yuan and 194 million yuan respectively, and the EPS will be 1.38,1.48,1.65 yuan respectively. The current stock price corresponding to PE is 32.38,30.20,27.08 times respectively.
Risk tips: lower-than-expected demand in the military market, bad debts in accounts receivable, changes in national tax policy, failure in new product development, and COVID-19 epidemic.
