3Q20 performance meets expectations
The company announced three quarterly results for 2020: revenue of 749 million yuan in the first three quarters, net profit of 102 million yuan for YoY+7.68%; and 14.86% for YoY+. 3Q20 realized revenue of 292 million yuan and YOY+ of 28.99% in a single quarter, and realized net profit of 44 million yuan and YOY+120.11%. The performance is in line with our expectations.
Research and development expenses and financial expenses have increased. 1) the company's R & D expenditure in the first three quarters was 87 million yuan, an increase of 77.85% over the same period last year, mainly due to the increase in R & D investment and the merger and acquisition of Hengda. 2) the financial expense of the company is 20 million yuan, and YOY+102.57%, mainly increases the amortization expense of interest on convertible bonds.
Monetary funds decreased and accounts receivable increased. 1) at the end of the third quarter, the company had monetary funds of 135 million yuan, a decrease of 54.75% compared with the beginning of the year, mainly due to the increase in outbound investment. 2) at the end of the third quarter, the balance of the company's accounts receivable was 1.159 billion yuan, an increase of 37.73% over the beginning of the year, mainly due to the increase in business volume and not yet fully refunded. 3) at the end of the third quarter, the company's inventory was 712 million yuan, an increase of 49.41% over the beginning of the year, mainly due to the increase in products and inventory goods due to the delivery of goods in the first half of the year. It is worth noting that the company has included some inventory bad debts in asset impairment losses.
There is a net cash outflow from operating activities and the payback is good. 1) the net cash outflow from the company's operating activities in the first three quarters was 177 million yuan, which was 16.75% lower than that in the same period last year, mainly due to good customer payback. 2) the net cash flow of the company's investment activities in the first three quarters was-420 million yuan, with a net inflow of 396 million yuan compared with the same period last year, due to the company's payment for the merger and acquisition of Hengda and new outbound investment in the current period.
Trend of development
The demand for information equipment is strong, and we should pay attention to the follow-up development of radar and satellite applications. 1) the company has traditional advantages in radar technology, and currently has products in special radar models, general radar signal processing modules, slope radar, 5G millimeter wave transmission antennas and so on. We expect that with the acceleration of information construction in specific areas of the country, the company's special radar models and other products are expected to achieve rapid growth. 2) according to the announcement on October 20, the company will raise no more than 602.4 million yuan in private, of which 282.3 million yuan will be used to acquire the remaining 30 percent stake in the subsidiary Aicote. After the acquisition of 70% stake in Eckert in 2016, the company and Eckert have formed good business synergy, and the degree of vertical integration in radar systems and satellite applications has been significantly enhanced. If the remaining 30% of this acquisition is completed, Eckert will become a wholly owned subsidiary of the company, which we believe will help to promote the long-term development of the company's electronic information business.
Profit forecast and valuation
We keep our profit forecasts for 2020 and 2021 unchanged, with net profits of 165 million and 200 million yuan respectively from 2020 to 2021, corresponding to 52 times earnings in 2020 and 43 times earnings in 2021.
We maintain the company's neutral rating and target price of 7.12 yuan, corresponding to 47 times / 37 times 2020max 2021 price-to-earnings ratio, with potential downside space of 8.7%
Risk.
Radar business development is not as expected, orders and delivery are not as expected.