Core ideas:

1. Q3 continues to be affected by the epidemic. In the first three quarters of 2020, the company realized revenue of 834 million yuan (- 14.1%), net profit of 21.19 million yuan (- 59.9%), and non-return net profit of 14.31 million yuan (- 65.4%). Among them, 2020Q3 achieved revenue of 301 million yuan (- 25.3%), net profit of 13.71 million yuan (- 31.6%); Q2 revenue of-28.3% compared with the same period last year, and net profit of-77.5%, which was continuously affected by the epidemic.

two。 Gross profit margin rose 13.4pct in the first three quarters. The company's Q1 single-quarter gross profit margin is 18.7%. The Q2 single-quarter gross profit margin is 26.7%. The Q3 gross profit margin is 32.1%. In the first three quarters, the gross profit margin increased 13.4pct, mainly because the impact of the epidemic led to the reduction of overseas low gross margin business income and the change of revenue structure.

3. The company's performance has yet to be brought under control. The company's aviation maintenance business accounts for 83% of revenue and 60% of gross profit, which is directly affected by the epidemic. The performance of the company has been restored and the epidemic situation has yet to be effectively controlled.

4. Increase fund-raising to further enhance the company's core competitiveness. The company issued a fixed increase plan on October 19, which intends to raise 1 billion yuan to invest in the aircraft comprehensive support project and civil aviation equipment localization R & D center project, in order to strengthen the investment in the research and development of civil aircraft airborne equipment and test equipment and enhance the core competitiveness.

5. Maintain the "overweight" rating. We predict that the EPS of the company from 2020 to 2022 will be 0.17yuan / 0.15yuan / 0.24yuan respectively, and the corresponding price-to-earnings ratio will be 123times / 134times / 85 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.

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