Investment logic
Deep ploughing the military simulation industry, multi-dimensional to achieve full coverage. The company is one of the few private enterprises with military simulation as the main business in China. From the perspective of military simulation market segmentation, the company has achieved "from heaven to earth" vertical full coverage of all simulation levels and horizontal full coverage of five major application fields; from the perspective of military simulation users, the company has completed full coverage of the military and various national defense industry departments; from the perspective of market distribution, the company has achieved full coverage of China's administrative areas. The company is currently in a period of rapid growth, with CAGR of 46.4% on the revenue side and 28.9% on the profit side in the past three years.
The grim international situation drives the growth of military expenditure, and the industry is booming under the background of national defense modernization. The proportion of equipment expenditure in military expenditure in China is increasing year by year, and the potential of military simulation market is huge. According to Jane's Defense data, the global market for simulated military training systems is expected to reach US $121.6 billion in 2027, with a compound growth rate of 25.0% in 2017-2027. The Asia-Pacific region is expected to spend US $42.6 billion on simulation and virtual training in 2016-2025, accounting for 25.3% of the world. In addition, according to Zhiyan consulting data, the market size of China's military computer simulation software industry will reach 13.31 billion yuan in 2022 and more than 20 billion yuan in 2027.
The leading position of the industry has gradually entered a period of large-scale expansion. The threshold of the military market is relatively high, the military industrial units have a certain technological path dependence on supporting manufacturers, the company has the qualifications required for the scientific research and production of military products, and the core products are self-developed. From 2018 to 2021, the gross profit corresponding to the core technology products accounted for more than 80%. The reuse rate and promotion rate of the company's project results are increasing continuously, and the CAGR of software orders reached 22% from 2018 to 2021 with less addition of basic software products. During the period from 2018 to 2022, the number of simulation application software products of the company has increased from 86 to 170. the revenue of software product business is expected to be 0.99,1.34 and 176 million yuan respectively from 2022 to 2024.
Raise funds for business promotion and expansion, in order to enhance core competitiveness. On June 23, 2022, the company issued 26.37 million shares at 52.03 yuan per share. About 1.37 billion yuan was raised for the construction of a new generation of real combat system, complex system multidisciplinary collaborative design and simulation test platform, common technology research and development center and supplementary working capital.
Investment suggestion
We estimate that the operating income of the company from 2022 to 2024 is 9.15,12.07,1.57 billion yuan respectively, and the net profit is 1.51,2.21,295 million yuan respectively, corresponding to EPS 1.43,2.10,2.79 yuan. The current stock price corresponds to 40,27,21 times of PE in 2022-2024 respectively. Give the company 55 times PE in 2022, corresponding to the target price of 78.49 yuan per share, cover for the first time, and give a "buy" rating.
Risk hint
The risk of project delay caused by the epidemic; technological research and development is not as expected; customer expansion is not as expected; the risk of lifting the ban on restricted stocks; the risk of labor costs accounting for a relatively high proportion of inventory.
