occurrences

Guoke Military issued an announcement on February 22, 2024. The company achieved revenue of 1.04 billion yuan in 2023, an increase of 24.25% over the previous year, and realized net profit of 141 million yuan, an increase of 27.40% over the previous year.

reviews

1. In 2023, the company's business scale continued to grow healthily, and both operating income and net profit increased compared to last year. In 2023, the company achieved revenue of 1.04 billion yuan, an increase of 24.25% over the previous year, and realized net profit of 141 million yuan, an increase of 27.40% over the previous year.

2. The repurchase of shares is intended for employee stock ownership plans or equity incentives. The company announced on February 8 that it plans to spend 70 million yuan to 130 million yuan to repurchase shares, with a repurchase price of no more than 58 yuan/share. The repurchased shares will be used for employee stock ownership plans or equity incentives at an appropriate time in the future. This measure will help establish and improve the company's long-term incentive mechanism and promote the company's sustainable development.

3. 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.

4. 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.

5. Profit forecast and investment rating: We expect the company's net profit to be 1.41, 2.03, and 297 million yuan in 2023-2025, up 27%, 44%, and 46% year-on-year. The current stock price corresponds to PE of 44, 31, and 21 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.