occurrences

On January 2, 2024, Guoke Military announced that its wholly-owned subsidiary Yichun Pioneer received a 2024 annual order contract for a certain type of primary ammunition signed with a certain unit, with a contract amount of 316 million yuan.

reviews

1. Yichun Pioneer, a wholly-owned subsidiary, received a 2024 annual order contract for a certain type of primary ammunition signed with a certain unit. The contract amount was 316 million yuan. The contract execution period was from the date the contract was signed to December 10, 2024. The contract amount reached 93% of Yichun Pioneer's revenue in 2022. Since its establishment, the company has been deeply involved in the scientific research and production of various types of small-caliber and medium-caliber ammunition, and has gradually developed into a new type of ammunition characterized by small-caliber anti-aircraft and anti-missile munitions, and the simultaneous development of multiple types of medium- and small-caliber ammunition. Under the threat of air strikes such as new low-cost drones, anti-aircraft artillery has become an efficient interception method and is expected to maintain rapid development.

2. The company undertakes the task of developing and mass-producing multi-type missile/rocket solid engine charges in our military, and will benefit from missile/rocket emissions in the future. It is estimated that at present, China's solid engine market space is about 10 billion yuan. The domestic market space is mainly state-owned institutions and units engaged in related business, and the barriers are high. The company undertakes the task of developing and mass production of our military's current multi-type missile/rocket solid engine. It has the capacity of the entire industry chain and will benefit from missile/rocket emissions in the future; in addition, as the company's technical level continues to improve, its market share is expected to increase further.

3. Overall performance in the first three quarters of 2023 maintained relatively rapid growth. The company achieved operating income of 678 million yuan in the first three quarters of 2023, an increase of 18.99% over the previous year, and achieved net profit of 93 million yuan to mother, an increase of 20.80% over the previous year. In the first three quarters, the company's overall gross margin was 34.24%, down 3.26pcts from the same period last year, and the net profit margin was 14.42%, up 0.49pcts from the same period last year.

4. Profit forecast and investment rating: We expect the company's net profit to be 1.40, 2.01, and 295 million yuan in 2023-2025, up 27%, 43%, and 46% year-on-year. The current stock price corresponds to PE of 60, 42, and 29 times, giving it a “buy” rating.

Risk warning

Downstream demand for missiles and ammunition fell short of expectations; competition in the solid engine and ammunition industry worsened; equipment procurement prices changed, etc.