Report summary
Incident: The company announced on August 22 that it achieved revenue of 136 million yuan (-6.96%) in the first half of 2022, net profit of 353.618 million yuan (+11.16%), net profit of 265.484 million yuan (-16.27%), gross profit margin of 37.71% (+8.27pcts), net interest rate 25.92% (+4.22pcts), and basic earnings per share of 0.46 yuan (-4.73%).
The company's first quarter performance growth rate was remarkable. Delivery was delayed due to the epidemic in the second quarter. During the reporting period for the first half of 2022, the company achieved revenue of 136 million yuan (6.96%) and net profit of 353.618 million yuan (+11.16%), mainly due to revenue-related government subsidies obtained in the current period and confirmed wealth management revenue from the purchase of bank wealth management products increased compared to the same period last year; looking at quarterly results alone, the company's Q1 revenue was 69 million yuan (+42.99%), and the net profit returned to the mother was 94 million yuan (+122.74%), 2022/1 The number of sales of inertial navigation systems in the quarter increased significantly year-on-year. At the same time, the company completed duty-free contract filing and increased profits; the company's Q2 revenue was 67 million yuan (-31.63% year on year, -2.90% month on month), and net profit returned to the mother of 21 million yuan (-16.00% year on year, +50.00% month on month). The company's second-quarter performance was greatly affected by the epidemic. Delivery of some inertial navigation system products was delayed, and sales volume of inertial navigation systems in the current period decreased compared to the same period last year, leading to a decrease in sales revenue.
In terms of expenses, during the reporting period, the company's period expenses were 17 million yuan (+25.24%), and the period fee rate was 12.69% (+3.26pcts). The increase in corporate expenses (9.045 million yuan, +118.08%) was mainly due to a significant increase in management expenses (9.045 million yuan, +118.08%), mainly due to intermediary expenses such as audit and evaluation required for the company's listing and the issuance of listing bonuses. At the same time, R&D investment (98 million yuan, +3.30%) continued to increase. In the first half of 2022, the company obtained a total of 7 invention patents, 9 utility model patents, and 26 software copyrights.
A leader in high-precision inertial navigation systems in China. The company's business revenue during the reporting period came from inertial navigation system products
The company's main products and services include inertial navigation systems, core components of inertial navigation systems, other components and technical services. The products are mainly used for weapons and equipment such as remotely guided ammunition. While building on the military industry, the company is gradually expanding its market to the civilian sector, and has developed products suitable for various application scenarios such as drones, unmanned ships, autonomous driving, energy exploration, surveying and mapping.
The company continues to participate in the development and supporting work of new types of weapons and ammunition for various military classes. The formalized**51, **51A, and**51B inertial navigation systems are all the only suppliers of related supporting equipment, and the technology is at an advanced level in China. As the cost of guidance devices falls and the requirements for accurate damage capability on future battlefields continue to rise, traditional “carpet bombing” has gradually become obsolete. All types of military weapons and ammunition require intelligent and accurate upgrades. The company is actively developing lower-cost inertial navigation systems to meet future requirements for accurate upgrading of a large number of traditional munitions and guidance for new types of artillery/unpowered bombs. The company's currently modeled inertial navigation system products are used in our military's active weapons and equipment, and the finalization time for some products is short, and the market space in this field is broad. At the same time, the military's improved inertial positioning navigation device project, which won the first place bid by the company in October 2020, will also have great additional demand after finalization in the future.
Investment advice
We believe that 1) The company's inertial navigation products are equipped with multi-type long-range missile drugs. The formalized**51, **51A, and**51B inertial navigation systems are all the only suppliers of related supporting equipment. As the military's demand for precision-guided munitions increases, the number of supporting ammunition is expected to continue to increase. At the same time, according to the relatively stable characteristics of military equipment, the company will fully benefit from the “expendable supplementation of mature models of equipment” of ammunition and “fixed mass production of new types of equipment”. The company's military product performance is expected to continue to grow steadily, and the high production capacity may be achieved in the middle and late stages of the “14th Five-Year Plan”;
2) The company's fiber-optic gyroscope production and construction project and inertial navigation device expansion construction project are expected to reach the intended usage state in December 2022. At that time, production capacity with an annual output of 2,500 sets of inertial guidance devices will be formed, thereby easing production capacity bottlenecks, better meeting customer needs, and increasing market share.
Based on the above views, we expect the company's revenue for 2022-2024 to be 400 million yuan, 534 million yuan and 704 million yuan respectively, net profit of the mother to be 88 million yuan, 118 million yuan and 149 million yuan respectively, and EPS is 100 yuan, 1.34 yuan, and 1.70 yuan respectively. Based on the company's position in the industry and future development prospects, we gave a “buy” rating. The target price was 60.30 yuan, corresponding to PE 60 times, 45 times, and 35 times for 2022-2024, respectively.
Risk warning
Fund-raising project construction and production capacity fell short of expectations; special equipment orders fluctuated; high concentration of customers and suppliers