Performance review
According to the company's semi-annual report, the company achieved revenue of 183 million yuan in the first half of 2022, a year-on-year growth rate of +6.88%, a year-on-year growth rate of 23 million yuan, a year-on-year growth rate of +7.23%, after deduction of 18 million yuan, a year-on-year growth rate of +42.45%; Q2 alone performed brilliantly, achieving revenue of 165 million yuan, a year-on-year growth rate of +53.60%, and Guimu's net profit of 44 million yuan, a year-on-year growth rate of +209.48%. Since the company's market is located in Beijing, production is located in Nanjing, and the R&D and management department is located in Shanghai, the Q1 domestic sporadic epidemic has hampered the progress of some projects and product delivery, while the impact of the Q2 Shanghai epidemic on the company's production and operation is limited, the company Q2 has caught up and achieved a reversal in performance. We believe that the military industry where the company is located is highly planned, and seasonal fluctuations do not affect the achievement of mission goals throughout the year.
At the beginning of the construction of national defense informatization, the penetration rate of military 4G was low and far from the ceiling, the core conflict of China's national defense construction changed from mechanization to intelligence. Using informatization means to make full use of the effectiveness of weapon platforms, military communication is the central nerve of the entire national defense informatization. Currently, our military is not fully equipped with all kinds of wired/wireless transmission equipment and switching networks. In particular, broadband wireless communication means are scarce, and connectivity capabilities for the last mile of the battlefield are limited. Among them, military 4G can meet and improve rigid requirements such as command and control and damage assessment. Rocket Force began to be deployed in 2016. The Army's assembly rate was not high. The Air Force, armed police, and war forces had just begun, the Navy had no fixed equipment yet, and the overall penetration rate of military 4G was still very low. In the first year of the “14th Five-Year Plan”, the entire army focused on project verification, and in the future, the speed of equipment assembly will increase year by year.
Military broadband communication is the absolute leader. The company's growth path is clear, and there is plenty of room, and I am optimistic about the large-scale installation of the company's military broadband equipment in the short term. The company is a comprehensive military broadband technology company. It undertakes most of the tasks of developing military broadband models and equipment. It has 38 models and products under development. The company achieved a breakthrough in armed police in the first half of the year based on the original Rocket Force, Army, and Air Force, further opening up room for growth; they are optimistic about the expansion of the company's product matrix in the medium to long term. In terms of military products, the company has reserves for R&D projects such as broadband and narrowband compatible wireless communication systems based on the SDR platform, next-generation access waveforms and self-organized network waveforms, military 5G products based on military requirements, and next-generation backbone network microwave network radio products. In terms of civilian products, domestic 5G small base stations have received network access permits and model approval certificates from the Ministry of Industry and Information Technology to complete prototype development of first-generation integrated stations. In the second half of the year, commercialization will be carried out according to market customization requirements.
Investment advice
We believe that as the absolute leading military broadband enterprise, the company will continue to benefit from the construction of national defense informatization and the increase in the penetration rate of military broadband, and that the company will proactively lay out the next generation military communication system and small domestic 5G base stations, and expand its long-term positioning from military 4G to the field of information technology equipment characterized by broadband. We raised the company's net profit forecast for 2022-2024 to 325, 4.38, 585 million yuan (previous value of 307, 406, 544 million yuan), corresponding EPS to 0.52, 0.70, and 0.93 yuan. The current stock price corresponding to PE for 2022-2024 was 28.74X/21.36X/16.00X respectively, maintaining the “buy” rating.
Risk warning
1) The domestic epidemic has repeatedly affected the company's project progress and product delivery; 2) the informatization construction of various military classes fell short of expectations; 3) the risk of changes in tax policies.
