The company realized a net profit of 31 million yuan in the first half of 2020. During the reporting period, the company's revenue grew steadily, and after excluding the impact of VAT rebate, profitability still improved significantly. Taking into account the company's potential market space and competitive advantages in the fields of airborne equipment maintenance and airborne equipment development, as well as the performance increment brought by protective armor products, maintain the "overweight" rating with a target price of 18.5 yuan.
Steady income growth and improved profitability. The company's 2020H1 realized revenue of 212 million, year-on-year + 24.49%, home net profit of 31 million, year-on-year + 1721.8%, non-net profit of 32 million, year-on-year + 3342.43%.
The company's helicopter protective armor and transport aircraft kitchen and bathroom interior products of the revenue side won the bid successfully, and the overall revenue growth was steady. On the profit side, due to the change in product structure, the company's gross profit margin decreased by 6.41pcts to 46.66% during the reporting period, and the expense rate decreased to 41.11% during the reporting period, mainly due to the reduction of hospitality expenses and travel expenses caused by the epidemic. At the same time, the VAT rebate income of the company's products in the current period was 23.8985 million yuan, which was + 408.95% compared with the same period last year. After excluding the effect of VAT rebate (calculated at 15% income tax rate), the net profit returned to the parent was about 10.8 million yuan. After adjusting for the same period last year, the loss was 2.28 million yuan, and the company's profitability still improved significantly.
The management of accounts receivable still needs to be strengthened, and the follow-up development of a substantial increase in inventory is expected. Affected by the decrease in sales rebates and other factors during the reporting period, the company's net operating cash flow was-30.56 million yuan, down 152% from the same period last year, and the final accounts receivable was 559 million yuan, up 54.38% over the same period last year. There is still room for further improvement in accounts receivable management. As some products won the bid for important projects, the company actively prepared goods and prepared products. at the end of the reporting period, the company's inventory was 249 million yuan, an increase of 31.81% over the same period last year, of which raw materials were 116 million yuan, an increase of 33% over the same period last year. In addition, the company issued 29.94 million yuan of goods, an increase of 25% over the same period last year. As follow-up products continue to be delivered, the company's performance is expected to maintain rapid growth.
Airborne equipment development business performance is eye-catching, protective armor may be a new support point. During the reporting period, the company's airborne equipment development business achieved an income of 151 million yuan, a sharp increase of 61.28% over the same period last year. The main reason was that helicopter protective armor and transport aircraft kitchen and bathroom interior products won the bid and signed a contract. Affected by the change in product structure, the gross profit margin of this business fell 13.71pcts to 48.15% compared with the same period last year. The company has advanced technology in the field of protective armor, and has become the main supplier of domestic helicopter protective armor. At the same time, the company has also completed the project of the next generation of protective armor products, and it is expected that with the gradual landing of orders for this product in the future, protective armor is expected to become a new supporting point for the company's medium-and long-term development.
Risk factors: military delivery is not up to expectations, business development is not up to expectations, scientific research progress is not as expected, and orders for protective armor are lower than expected.
Investment suggestion: taking into account the large scale of the company's accounts payable and the existence of certain impairment pressure, adjust the company's annual EPS forecast in 2020-21-22 to 0.38max 0.50x0.64 yuan (the original 2020max EPS forecast for 21 years is 0.43kg 0.50 yuan, and the 2022 EPS forecast is an increase). The current price of the company is 16 yuan, corresponding to the PE of 2020-21-22 and 42-32-25, respectively. Taking into account the company's potential market space and competitive advantages in airborne equipment maintenance and airborne equipment development, as well as the performance increment brought by protective armor products, maintain the "overweight" rating with a target price of 18.5 yuan (corresponding to 48 times PE valuation in 2020).