For the first time, we cover the full-spectrum industrial UAV system leader: vertical and horizontal shares (688070.SH), giving a "recommended" rating for the following main reasons:
Deep ploughing industrial-grade UAV, vertical take-off and landing fixed-wing UAV market share of the first in the country. Founded in 2010, the company focuses on the development and service of industrial-grade UAV systems. The products cover Dapeng's eight series of vertical take-off and landing fixed-wing UAV systems, with many advantages such as high energy efficiency, long flight time, vertical take-off and landing and hovering. Deep tillage in surveying and mapping and geographic information, security, inspection, emergency and other applications. In 2019, the company ranked first in China's vertical take-off and landing fixed-wing industrial UAV market, accounting for 53.8%, and ranked second in China's industrial UAV market share of 5.4%.
Investment in R & D is increased, and profit margins are expected to pick up after fluctuations. 1) from 2017 to 2020, the company's revenue increased from 100 million yuan to 270 million yuan, and the net profit of CAGR=38%; increased from 14 million yuan to 41 million yuan, CAGR=43%. The company is small but growing fast. 2) since 2017, the company's net profit has risen first and then declined, mainly due to the transformation of the company's products from UAV platforms to UAV systems, and structural changes and periodic price adjustments are the main reasons for the decline in profit margins. In the future, we expect its net profit rate to pick up and continue to increase. 3) in terms of application areas, before 2019, surveying and mapping and geographic information were the main sources of income for the company, accounting for more than 60% of the total revenue. Since 2020, the company has seized on the improving trend in various areas such as security and achieved the landing of a number of major projects, and the total order volume in 2021 increased by 33.39% compared with the same period last year. 4) the company attaches importance to R & D, and the R & D investment has been increasing since 2017, and the R & D expenditure rate has been stable between 10% and 15%.
Hundreds of billions of markets for industrial applications are waiting to be explored, and breakthroughs are also expected in military trade and special fields. 1) in recent years, the industrial application of UAV has achieved rapid development with the expansion of downstream surveying and mapping, emergency response, security, inspection and other fields. We expect that by the end of the 14th five-year Plan, China's industrial UAV market will exceed 150 billion yuan, accounting for more than 50% of the global market. 2) from 2010 to 2020, China's UAV military trade accounted for about 17% of the global UAV military trade market, ranking third in the world. Since its inception, the company has expanded its overseas business well, accounting for 11% of overseas business revenue in 2021 (industrial applications). In the future, we will not rule out making progress in the arms trade market.
3) VTOL UAV products have the advantages of low cost, multi-purpose and low environmental requirements, and are expected to become one of the development trends of aviation equipment in various countries in the future. We expect that by the end of the 14th five-year Plan, the procurement scale of special UAV in China will be nearly 10 billion yuan, and the company may benefit from this.
Investment suggestion: the company is the leader of industrial UAV system in China, with rich product pedigree and complete UAV industry chain. The company's performance is expected to continue to grow in the next few years, benefiting from the demand in the downstream industrial sector and the potential market in military trade and domestic special areas. We estimate that the net profit of the company in 2022-2024 is 55 million yuan, 121 million yuan and 185 million yuan respectively, and the current stock price corresponds to the 69x/32x/21x of PE in 2022-2024. Considering the strong downstream demand and the strong competitiveness of the company, we give the company 40 times PE,2023 in 2023 with an EPS of 1.38 yuan per share, corresponding to the target price of 55.20 yuan. Cover for the first time and give a "recommended" rating.
Risk tips: downstream demand is lower than expected, product production and delivery is not as expected, technical risks and so on.