Event: the company announced on August 18 that its operating income for the first half of 2020 was 212 million yuan (+ 24.49%), its net profit was 31.1156 million yuan (+ 1721.80%), its gross profit margin was 46.66% (- 6.41pcts), and its net profit rate was 14.66% (+ 13.66pcts). Of this total, the operating income in the second quarter of 2020 was 160 million yuan (+ 48.40%).
Main points of investment:
Multi-product line hedging epidemic impact, order delivery, outstanding performance: operating income and return net profit in the first half of 2020 increased significantly compared with the same period in previous years, and home net profit increased by 1721.80% compared with the same period last year. Among them, the operating income in the second quarter increased by 48.40% over the same period last year, mainly for three reasons: customers participating in the emergency procurement project to achieve production delivery. Revenue from airborne equipment development increased by about 57 million yuan over the same period last year. The VAT rebate increased by 19.2029 million yuan over the same period last year, and the portfolio of accounts receivable and the expected credit loss rate were adjusted after the implementation of the new financial instruments standards. The company's main customers are limited affected by the epidemic, and a number of product lines can hedge some of the decline in business, production activities are basically normal operation.
During the reporting period, the company's gross profit margin was 46.66% (- 6.41pcts), which we speculated was mainly due to the change in the structure of delivered products; the net increase in cash and cash equivalents was-28.3243 million yuan (- 2093.85%), mainly due to the decrease in cash received from the sale of goods and services in the current period; other income was 25.5065 million yuan (+ 310.62%), mainly due to the increase in tax rebate The loss of credit impairment was 592900 yuan (- 111.77%), mainly due to a decrease in the provision for bad debts in the current period; financial expenses of 2.9188 million yuan (+ 1084.98%), mainly due to an increase in interest on short-term loans; and accounts receivable of 559 million, accounting for 42.67% of total assets.
The company's main business includes two major businesses: airborne equipment (airborne equipment development and aviation maintenance) and intelligent measurement and control (measurement and control equipment development and information technology). Among them, the operating income of airborne equipment development was 151 million yuan (+ 61.28%), mainly due to the successful bid of important projects and the signing of contracts, with a gross profit margin of 48.15% (- 13.72%). We speculate that it is due to changes in the structure of delivered products during the reporting period. The operating income of aviation maintenance was 55.6565 million yuan (- 0.70%), mainly due to the decrease of airline capacity caused by the epidemic, with a gross profit margin of 44.64% (+ 3.30%), and an operating income of 163800 yuan (- 98.04%) from the development of measurement and control equipment, mainly due to on-site commissioning and delivery activities limited by the epidemic, gross profit margin of 63.51% (+ 22.70%) The operating income of information technology is 5.9202 million yuan (- 53.63%) and the gross profit margin is 27.14% (- 41.50%). We speculate that it is due to the change of product structure.
Focus on aerospace and defense, some products are the preferred suppliers: the company focuses on aerospace and defense, airborne equipment business provides airborne product research and development, production, maintenance and other products and support services, intelligent measurement and control business provides intelligent manufacturing, measurement and control equipment, simulation systems, information technology and other products and integrated technology solution services. Among them, helicopter anti-crash seats, transport aircraft kitchen and bathroom interior decoration, helicopter protective armor, some models of radio compass and radio altimeter and other products are the preferred suppliers for relevant customers.
1. Airborne equipment development (accounting for 70.92% of the main business income in the first half of 2020): core products include cabin equipment such as aviation seats and kitchen and bathroom interiors, protective armor, radio navigation equipment, etc. Among them, helicopter crash-resistant seats account for more than 80% of the market share in the domestic defense field, and are in the leading position in the subdivision industry, and the research and development business of interior decoration of transport aircraft is also leading in the market segment. Radio compass and radio altimeter are the company's traditional advantage products. In the field of civil aviation airborne equipment, the main products are kitchen plug-ins, economy class seats, entertainment systems, cabin lighting systems and so on. Domestic ARJ21 regional jet kitchen plug-ins were delivered continuously during the reporting period.
two。 Aviation maintenance (26.22%): mainly includes aviation parts maintenance, navigable aircraft modification and whole aircraft maintenance guarantee. Among them, the maintenance of aviation components has FAA, EASA, CAAC and JMM maintenance licenses, covering mainstream manufacturers such as Airbus, Boeing Co, Pakistan Aviation Industry and Aviation Industry; aircraft refitting business has a number of refitting STC and MDA certificates, covering all kinds of remote sensing, monitoring and artificial weather and other operational equipment and ADS-B and other aircraft system equipment upgrading and refitting services. During the reporting period, the company's electronic maintenance center obtained the AS9110 international aircraft maintenance quality management system certificate issued by the global certification body SAI Global.
3. Development of measurement and control equipment (0.08%): mainly provide customized support equipment, simulation measurement and control equipment, intelligent workshop (intelligent equipment workshop, intelligent tool cabinet, intelligent spraying) and intelligent warehousing (automated three-dimensional warehouse) for aircraft manufacturing units, users and maintenance enterprises. The company has launched intelligent tool cabinets based on RFID positioning applications and began to supply them in bulk. At the same time, the company is also actively developing the space TT & C market.
4. Information technology (2.79%): provide software products and information technology solutions in the fields of digital locomotive, scientific research management information system, etc.
Steady growth in military equipment, steady development of the civilian market: in terms of military products, the company's customers mainly include all kinds of aerospace and defense users, industrial enterprises and subordinate scientific research and production units and research institutes, civil aviation transport and general aviation operation companies, national defense and emergency support and other aircraft users. The company has technical and market advantages in the fields of helicopter anti-crash seats, kitchen and bathroom interior decoration of transport aircraft, protective armor, radio navigation, etc.; in-situ testing equipment and navigable aircraft plus modification occupy the first-mover advantage; accompanying security system, helicopter terrain hint and warning system, multi-mode receiver and comprehensive display and other research and development and application has domestic alternative advantages. With the upgrading of military equipment and the increasing demand for localization of core equipment, the company's related business is expected to grow continuously and steadily.
In terms of civilian products, the company actively develops the civilian market based on mature military products, and the design of the new type of civil aviation economy class seat has been completed and entered the stage of experimental evidence collection; and the localization project of airborne equipment such as entertainment display and cabin lighting is also progressing smoothly. At the same time, the company, together with Comac and the Civil Aviation Administration of China, has jointly promoted the localization of cabin equipment such as kitchen plug-ins and the formulation of relevant industry standards. At present, the first batch of domestic kitchen plug-ins and bathroom water heaters have been successfully delivered. According to Annual Review 2019 released by the International Air Transport Association, by the end of 2019, China had the world's second largest domestic air transport market after the United States, with an average annual growth rate of about 10%. With the large-scale growth of China's civil aviation manufacturing and market space in the future, and the company's corresponding products continue to collect evidence, civil business is expected to become a new increment in the future.
Rapid discovery of customer pain points and diversified development of products and services: based on existing mature products and services, the company discovers the new needs of core enterprises and key customers in the industry, and quickly provides flexible and diverse products and solutions. enrich market segments and business portfolio to achieve rapid development. The company has set up two divisions of civil aviation and aviation equipment and a number of product platforms, formulated a rolling three-year strategic plan from 2021 to 2023, and adopted a diversified development strategy of developing multiple product lines at the same time. In terms of new products, the protective armor business is one of the company's rapidly developing businesses in recent years, and has become the main supplier of domestic helicopter protective armor, and the aircrew protective equipment business is also under development. the flight test verification of helicopter terrain hint and warning system is nearing completion, and the R & D and demonstration of products such as multi-mode receiving equipment, integrated backup display and visual navigation are actively promoted. An important breakthrough has been made in the software development and algorithm of the intelligent manufacturing key scientific research project "Robot automatic spraying production Line based on Machine Vision". It is planned to deliver the contract project on helicopter intelligent rotor spraying and intelligent warehousing system solution services in the second half of the year.
Investment suggestion: the company locates the comprehensive system equipment and the technical solution provider, has established the diversified, multi-level, multi-domain product platform. (1) helicopter anti-crash seats, transport aircraft kitchen and bathroom interior decoration, helicopter protective armor, radio compass and radio altimeter of some models are the preferred suppliers; (2) the growth of military products benefits from the growth of military equipment, upgrading of equipment and localization of core equipment, civilian products also maintain stable cooperation with mainstream aircraft manufacturers and maintenance enterprises at home and abroad. (3) through mining customer pain points to develop new business, new products such as protective armor business, all kinds of navigation systems and intelligent manufacturing are expected to form new increments in the future.
We predict that the return net profit of the company in 2020, 2021 and 2022 is 115 million yuan, 138 million yuan and 177 million yuan respectively, and the EPS is 0.45,0.54,0.69 yuan respectively. Given a "buy" rating, the target price is 22 yuan, corresponding to PE of 48.89,40.74,31.88 times.
Risk hints: market demand is lower than expected, policy environment changes, emerging business growth rate is lower than expected, COVID-19 epidemic.