Core ideas:

1. It was intensified by the impact of the epidemic in the second quarter. 2020H1 realized revenue of 533 million yuan (- 6.1%), net profit of 7.48 million yuan (- 77.2%), and non-return net profit of 4.23 million yuan (- 81.58%). Among them, the year-on-year growth rates of revenue and return net profit in the second quarter were-28.3% and-77.5% respectively, which were aggravated by the impact of the epidemic compared with the first quarter.

two。 Equipment development and security business Q3 is expected to usher in the recovery. The revenue of 2020H1 equipment development and guarantee business accounted for 17.2%, and the revenue during the period was 91.34 million, down 13.4% from the same period last year. Among them, Q2 revenue decreased by 34.9% year-on-year, mainly due to the delay of the business affected by the epidemic. In view of the good control of the domestic epidemic, Q3 is expected to recover.

3. Domestic aviation maintenance and service business is weakening. The revenue of 2020H1's domestic aviation maintenance and service business accounted for 19.1%. During the period, revenue reached 101.16 million, down 15.3% from the same period last year. Among them, Q2 decreased by 21.7% year on year, which was enlarged compared with Q1 (- 6.8%). Benefiting from the proper prevention and control of the domestic epidemic, the impact on the business will gradually weaken.

4. The resumption of subsidiary MMRO business has yet to be brought under control in Europe. 2020H1MMRO business revenue accounted for 63.7%, during the period achieved revenue of 338.13 million, down 0.1% from the same period last year; of which Q2 fell by 27.6% year on year (Q1VOV 30.8%), was significantly affected, and the recovery has yet to be controlled by the epidemic in Europe.

5. Airborne equipment has been listed in the ARJ21 installed list, achieving a civilian breakthrough. The company's PMA printer has passed the supplier audit and has been listed in the ARJ21-700. at the same time, it has completed the first batch of small batch delivery, realizing the first installation of civil aircraft and further expanding the growth space.

6. Maintain the "overweight" rating. We predict that the EPS of the company from 2020 to 2022 will be 0.27 yuan / 0.41 yuan / 0.64 yuan respectively, and the corresponding price-earnings ratio will be 63 times / 41 times / 27 times respectively. Consider the company's HUMS military aircraft, ATE, PMA and other research and development equipment to achieve civilian expansion, orderly research and development of new products EHM, strengthen the core competitiveness, maintain the "increase" rating.

7. Risk hints: the impact of the epidemic exceeded expectations, HUMS installation was not as expected, and equipment research and development was blocked.