I. Overview of events
On August 27, the company released its semi-annual report for 2020, with an operating income of 910 million yuan, an increase of 41.09% over the same period last year, and a net profit of 42.25 million yuan, down 34.73% from the same period last year.
II. Analysis and judgment
Q2 performance slips again, equity incentive amortization affects performance
In the first half of 2020, the company achieved operating income of 910 million yuan, an increase of 41.09% over the same period last year; net profit of 42.25 million yuan, down 34.73% from the same period last year; and 90.11 million yuan of net profit, up 19.43% from the same period last year, without taking into account the cost of equity incentive fees. In a single quarter, Q2 achieved an operating income of 470 million yuan, an increase of 31.67% over the same period last year; its net profit was 18.47 million yuan, down 47.70% from the same period last year, and the performance declined again in the second quarter. During the reporting period, the company's expense rate during the period was 20.31%, an increase in 4.03pct from 16.28% in the same period last year, mainly because the cost of amortized equity incentive fees was included in management expenses, resulting in a year-on-year increase of 121.28% in management expenses. In addition, the R & D expenditure was 45.81 million yuan, an increase of 32.05% over the same period last year. In terms of profit margin, the gross profit margin was 29.03%, down 0.89% from the same period last year. Roe was 1% lower than the same period last year, and 0.58pct was down from the same period last year. The company's inventory was 1.044 billion yuan, an increase of 25.48% over the same period last year, mainly due to an increase in orders leading to an increase in spare parts for products and raw materials.
Missile + satellite demand increases, military electronics is expected to continue high growth military electronics business has become the core of the company, including microwave circuits and components and semiconductor devices, such as microwave diodes and transistors, microwave monolithic, hybrid integrated circuits and so on. During the reporting period, the sector achieved revenue of 430 million yuan, an increase of 88.20% over the same period last year; gross profit margin was 35.55%, down 8.55pct from the same period last year. In the first half of the year, the company's science and technology project "High density Integrated Packaging Microwave Circuits" was officially launched, which will meet the needs of the rapid growth of RF microsystem applications in the spaceborne and missile-borne fields. During the 14th five-year Plan period, the number of missile procurement is expected to increase significantly, the progress of Leo satellite construction will be accelerated, the demand for microwave components is expected to increase significantly, and the company's military electronics business will continue to grow at a high level.
Shipbuilding is greatly affected by the epidemic, and it is expected to achieve restorative growth during the reporting period, the company's shipbuilding sector achieved revenue of 189 million yuan, down 10.85% from the same period last year. Affected by the epidemic, shipbuilding sales began to resume in April, resulting in a decline in revenue in the first half of the year. In the first half of the year, the company successively realized the sales of 410 passenger catamaran aluminum alloy high-speed passenger ships of Shanghai passenger Shipping Company and Xiangjiang Waterway Construction batch work boats of Hunan Waterway Construction Investment Group. As the impact of the epidemic is eliminated, we expect the company's ship sector to achieve restorative growth in the future.
Implement equity incentive and be optimistic about the long-term development of the company
On January 15, 2020, the company issued the 2020 stock option and restricted stock incentive plan, which intends to grant a total of 51.95 million rights and interests to 48.95 million senior managers and core technical (business) personnel, including 48.95 million stock options and 3 million restricted stocks. the exercise price of the option is 7.84 yuan and the restricted stock price is 3.92 yuan per share. The interests of the company are bundled with the interests of the core staff, which is conducive to the long-term development of the company.
III. Investment suggestions
The company has made a breakthrough in the field of military electronics, and the original boat plate still has room for growth in the future. We are optimistic about the long-term development of the company.
It is estimated that the EPS of the company in 2020-2022 is 0.34,0.47 and 0.68 yuan respectively, corresponding to the PE of 55X, 40X and 27x, the average valuation of the comparable company is 70X, and the "recommended" rating is maintained.
IV. Risk hints
The progress of shipbuilding capacity removal is slow; the progress of product research and development is not as expected; the volatility risk of military orders is stored.