occurrences
The company released its semi-annual report. 2020H1 achieved operating income of 910 million yuan, an increase of 41.09% over the previous year, and achieved net profit of 49 million yuan to the mother, a year-on-year decrease of 34.73%.
reviews
1. The military goods business developed rapidly, and amortization of equity incentive expenses lowered net profit and downstream demand for military goods surged. In the first half of the year, Chengdu Yaguang achieved operating income of 680 million yuan, an increase of 67.95% over the previous year, and net profit of 101 million yuan (of which shared equity incentive costs were 234.377 million yuan), regardless of equity incentive amortization, which fully demonstrated the high sentiment of the military industry. The boating business was greatly affected by the epidemic. Order delivery was delayed a lot, with revenue of 189 million yuan in the first half of the year, a year-on-year decrease of 10.66%, and a loss of 39.3983 million yuan (of which the cost of shared equity incentives was 17.4291 million yuan). The amortization of equity incentive costs significantly lowered the company's apparent net profit. Excluding this factor, the company's net profit returned to the mother increased 19.43% year-on-year in the first half of the year.
2. The boating business continued to lose money, and the gross margin of microwave components declined. The boating business experienced large losses in the first half of the year due to the impact of the epidemic. It is expected that in the second half of the year, with the landing of special customer orders, the boating business will greatly improve. In the future, the company is expected to divest the boat business and further focus on military business development. Microwave module revenue in the first half of the year increased 88.20% year on year, gross margin was 35.55%, down 8.55pct from the previous year. The decline in microwave module gross margin was due to the fact that there were many low-margin products that confirmed revenue in the first half of the year. It is expected that the gross margin level for the whole year will remain above 40%.
3. Profit forecasting and investment suggestions
In view of the fact that the company's downstream military products are expected to be released significantly during the “14th Five-Year Plan” period, the company's profit forecasts and target prices will be raised. Excluding amortization of equity incentive costs, the company is expected to achieve operating income of 2,649 million yuan/3,338 million yuan/4.119 billion yuan in 2020/2021/2022, net profit of 357 million yuan/592 million yuan/734 million yuan, EPS is 0.35 yuan/0.59 yuan/0.73 yuan respectively, and the corresponding PE is 54 times/33 times/26 times, respectively. Since the company's supporting orders in the fields of downstream missiles, radars, satellites, electronic warfare, etc. are expected to be released rapidly on a large scale, the company is likely to benefit from a high degree of certainty and a great degree of benefit. It was given 45 times PE, corresponding to a target price of 26.55 yuan in 2021, maintaining the “buy” rating.
4. Risk warning
The release of military orders and the expansion of production capacity fell short of expectations; profit forecasts and valuation judgments fell short of expectations.