It revolves around the entire life cycle of equipment support, R&D simulation, and back-end testing in the field of optical missile guidance, and is the core target of missile weapons and equipment. Since its establishment in 2007, the company has continued to focus on providing high-precision components, devices, systems and solutions in the fields of optical target and scene simulation, optical guidance, special optoelectronic testing, and laser countermeasures. It has R&D and mass production capabilities for a variety of serial high-end military products, breaking foreign technology blockades and filling domestic gaps in various product segments. The company has successively undertaken major supporting development work for 4 major national science and technology projects, high-tech projects, etc., and has received the first prize of the National Defense Science and Technology Progress Award for more than 20 national key weapon models. Major customers include general missile units such as the Aerospace Science and Industry Group and the Aerospace Science and Technology Group. The company's products run through the whole process of precise guidance weapon design, R&D, demonstration, production, and service testing, reflecting the high degree of integration between the company and industry segments. According to the 2019 annual report data, in terms of business, 95% of the company's revenue revolves around the field of optical guidance in missile weapons and equipment. Among them, optical guidance systems directly supporting missiles account for 42%, optical target and scene simulation systems serving the development stage of new missile models account for 32%, and special optoelectronic test equipment used for missile back-end testing accounts for 20%. Optical guidance systems are the company's core business, equipped with several key missile models, and high performance growth. Optical guidance systems have become an important guidance method in missile composite guidance systems, and the penetration rate is still gradually increasing. Optical guidance systems are a core component of precision guidance weapons, and are one of the important guidance methods for autonomous vehicle guidance systems such as missiles. Precise guidance weapons using photoelectric guidance have the advantages of strong resolution and high hit accuracy. They are widely used in the fields of ground-to-sea, air defense and anti-aircraft, space attack and defense, etc., and are widely used in multi-platform guidance weapons and autonomous vehicle systems such as land, sea, air, and sky. As the battlefield environment becomes more complex, modern warfare places higher demands on precision guided weapons, such as omnidirectional attacks, all-weather operation capability, higher guidance accuracy, longer range of action, stronger anti-interference ability, ability to deal with multiple targets and automatic target recognition, etc. Although various existing single-mode guidance uses a lot of advanced technology, it is difficult to meet many of these requirements. Composite guidance combines two or more models in serial or parallel to complement each other, give full play to the advantages of each model, avoid their shortcomings, and comprehensively improve the performance of weapon systems. It is the focus of competitive development among countries, and it is also one of the most promising directions in optical guidance technology. The company's optical guidance systems cover both imaging and non-imaging guidance systems, and are equipped with a number of key types of missile equipment, which is an elastic growth point for performance. For the first time in China, the company proposed a new optical imaging guidance technology based on the principle of image square scanning, and realized engineering applications, solved the problem of large field of view imaging in small-scale scanning of object space, and supported the R&D, production and equipment of various key types of missiles. According to the company's announcement, the optical guidance system provided by the company for a certain type of missile achieved excellent results in target shooting tests, and also participated in product research and development for several key models. It has successfully equipped certain advanced types of missiles and certain key types of missiles. In 2019, the company's optical guidance system products achieved a year-on-year increase of 53.54% in revenue and a 5.19 percentage point increase in gross margin. In 2018, due to factors such as adjustments to customer order plans, the company's optical guidance system orders decreased, leading to a decline in optical guidance system revenue. Currently, in the face of the complex and changing environment in China, the missile industry is in high demand. According to the company's prospectus, the important R&D models that the company participated in have begun to move into mass production. The company's optical guidance system revenue is expected to maintain high growth in the future, and it is also the biggest flexible highlight of the future business. The entire industrial chain in the field of optical guidance runs through: the continuous upgrading of models benefiting from optical target and scene simulation systems, and a sharp rise in the stock of missiles benefiting from special optoelectronic test equipment. The optical target and scene simulation system provides optical dynamic targets or scenarios for the development, testing and verification of optical guidance weapons. There is no replacement for similar products in the short term. Its application can effectively save live fire targeting costs, significantly shorten the development cycle, and greatly reduce R&D costs. As of July 2019, the company has delivered more than 50 sets of optical target and scene simulation systems. A single set of optical target and scene simulation systems is valuable. The company can currently provide various products and services from stand-alone equipment to simulation laboratories. The product has been successfully used in the development of key types of missiles in many countries, and can be upgraded according to changes in demand, and has good scalability. Special optoelectronic test equipment is mainly used for calibrating and testing missiles, and the market increased in proportion as missiles were increased. With the increase in optical-guided weapons and equipment, the demand for inspection and security of optically-guided weapons is becoming more and more intense. According to “Systems Engineering and Electronic Technology”, the storage period of a missile accounts for 99.9% of its service life. During the long-term storage of missiles in ammunition depots or temporary storage at positions, in order to confirm whether the missiles are in a normal working state, optically guided weapons must be tested regularly or irregularly. The company has successfully developed various types of optical calibrators and optoelectronic testers, which can meet the needs of different application scenarios such as laboratories and positions. Many special optoelectronic test products have been mass-produced. The company's special optoelectronic test equipment can provide test technical support and equipment support for all aspects of missile sizing, batch production, storage and launch. It has the advantages of high detection accuracy, wide spectral coverage, easy operation, and reliable performance. According to the company's semi-annual report, it has now completed supporting tasks for 10 key types of missiles, providing equipment support for building reliable and responsive weapon systems. Laser countermeasure systems and the company's optical technology military to civilian business expansion can be expected in the future. The company has now completed the prototype development of multiple sets of laser beam emission systems in China, breaking through many key technical difficulties, and ranking among the highest in the country. The laser countermeasure business developed from optical systems to complete machines. The laser countermeasure system developed by the company participated in and successfully completed the “National Day 70th Anniversary Celebration” clearance defense and security mission for the “National Day 70th Anniversary Celebration”, which was highly recognized by the Ministry of Public Security and related departments. Furthermore, laser countermeasure systems have also made progress in the military trade field. Extensive civil product research and development work has been carried out in the field of optical imaging, using optical imaging and infrared technology to develop civilian products. In particular, a series of products have been developed, including man-made photoelectric loads for inspecting high-voltage lines and wire towers, drone-based photoelectric loads for inspecting local power grids, fixed monitoring equipment to monitor substations, and walking robot inspection equipment. Sales revenue has been achieved in 2019, and further expansion can be expected in the future. Investment proposal: The company covers the entire life cycle of equipment support, R&D simulation, and back-end testing in the field of optical missile guidance, which is the core target of infrared guidance systems for missile weapons and equipment. The missile business accounts for 95%. Among them, optical guidance systems are the company's core business. It is already equipped with many key missile models, and is expected to continue to grow at a high rate along with batch production of many other important models, which is a highlight; optical target and scene simulation systems are a necessary means in the R&D phase, benefiting from the continuous development and upgrading of new models; special optoelectronic test equipment is used for missile calibration and testing, and the market has increased proportionately after the launch of missiles. The company's business in 2020-2022 is estimated to be 77 million yuan, 102 million yuan and 158 million yuan, respectively, and EPS is 0.77 yuan, 1.02 yuan, and 1.58 yuan. Corresponding PE is 69X, 52X, and 33X, which is covered for the first time, giving it a “buy-A” rating. Risk warning: R&D progress falls short of expectations; mass production of key models falls short of expectations.