Incident: Gaode Infrared released its 2022 annual report. The company's revenue in 2022 was 2,529 billion yuan, a decrease of 27.75% over the previous year; Guimu's net profit was 502 million yuan, a decrease of 54.82% over the previous year. A cash dividend of 1.30 yuan (tax included) is distributed to all shareholders for every 10 shares, and the capital reserve fund is used to transfer 3 shares to all shareholders for every 10 shares.
Comment: The company's 2022 performance fell short of expectations, domestic performance declined, and demand from overseas markets was keen. 1) Affected by factors such as changes in procurement plans for model category projects, price adjustments for J-products, and value-added tax policies, domestic business revenue decreased by 37.18% year-on-year to 1,918 billion yuan, and gross margin decreased by 11.30 pcts. 2) The popularity of overseas markets has not abated. Overseas business revenue in 2022 was 610 million yuan, an increase of 36.82% over the previous year. 3) The company continues to invest heavily in R&D, investing 456 million yuan in R&D in 2022, an increase of 22.97% over the previous year.
The advantages of infrared and integrated optoelectronic services are strong, and military and civilian demand is heating up. 1) The company completed the construction of infrared chip projects such as the “Industrialization of a New Generation of Autonomous Infrared Chips”. Chip production capacity was greatly increased, and the cost of defense chips was rapidly reduced; the product won bids for many major domestic models and will be applied in large quantities. 2) The company promotes wafer-level packaging and even pixel-level detector chips to achieve more categories, smaller sizes, lower power consumption and greater resolution, and promotes large-scale application of infrared sensing technology in emerging civilian fields; Xuanyuan Intelligent Driving achieves dual coverage in passenger and commercial fields, and accelerates the application of infrared technology in the automotive field.
The complete equipment system business test achieved excellent results, and is expected to drive revenue growth after mass production. The company took the lead in successfully developing a complete equipment system in China, and obtained overall scientific research and production qualifications for such systems. Due to project schedule adjustments in 2022, order signing and revenue confirmation were delayed. The overall research project of the company's complete equipment system covers a wide range of fields and categories, and will undertake two key overall model mass production tasks. The overall share of the company's model project business is skewed towards equipment, which is expected to drive future revenue and profit growth.
Traditional non-lethal munitions and information-based munitions need to be restored. Due to reduced orders, revenue from traditional ammunition and information-based ammunition was 264 million yuan in 2022, a year-on-year decrease of 67.18%. Considering the second phase of the new pyrotechnic zone and the full completion of the automated production line, we look forward to the release of production capacity and a rebound in business in the future.
Profit forecasting, valuation and ratings: Benefiting from the National Defense Force's informatization, intelligent construction goals, and broad application prospects of low-cost infrared products in the civilian field, the company's future performance is expected to benefit and grow steadily. We forecast the company's revenue for 2023-2025 to be 39.80/50.20/6250 billion yuan respectively, up 57.40%/26.13%/24.50%; considering the pace of mass production of model products, we slightly adjusted the net profit of 23-24 to 1,330/1,647 billion yuan (-11.82%/+1.09% from the previous forecast), adding 2,033 billion yuan to the 25-year forecast, and the net profit of Fumo in 23-25 increased 164.87%/23.84%, respectively. 23.49%; the current stock price corresponds to PE 29/24/19 times respectively, maintaining the “buy” rating.
Risk warning: Order demand falls short of expectations, R&D falls short of expectations, and the risk of rising costs.