Incidents:
The company released its 2024 semi-annual report on August 7, 2024. During the reporting period, the company achieved total operating income of 0.476 billion yuan, a year-on-year decrease of 9.15%; net profit attributable to mother was 20.3978 million yuan, a year-on-year decrease of 9.04%; and net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 19.3276 million yuan, a year-on-year decrease of 3.46%.
Opinions:
The company's mid-term performance was under pressure in the short term, and the financial structure was optimized during the reporting period. During the reporting period, the company optimized the debt structure and appropriately reduced the short-term loan ratio, and financial expenses were -28.55% compared to the same period; in addition, the net cash flow generated by the company's operating activities increased during the reporting period, and the net increase in cash and cash equivalents was +61.60% year-on-year. The company's main business revenue is mainly concentrated in the second half of the year. Short-term performance may be affected by seasonal disturbances.
The company's three major businesses are progressing steadily, and it is expected to benefit from stable investment in railway construction, the rapid development of the traditional aerospace industry, the boom in commercial aerospace, and the rapid development of the nuclear industry. In terms of business, the company has continued to cultivate in the three major fields of rail transit, aerospace, and nuclear industry, and has formed an industrial pattern with three major business segments: railway vehicle operation safety inspection and maintenance systems, intelligent testing and simulation systems, and microsystems and control components, nuclear industry and special environment automation equipment.
In the rail transit sector, strengthen the domestic market and explore overseas markets. During the reporting period, the company's revenue from railway vehicle operation safety inspection and maintenance systems increased steadily, +4.23% year over year; gross margin increased significantly, +11.78% year over year. The company has a railway market user base of more than 30 years in the railway industry, and maintains a first-tier position among railway operation safety service providers and rail transit locomotive vehicle inspection and maintenance intelligent equipment providers.
In terms of the domestic market, China's railway construction investment has been growing steadily. In the first half of 2024, railways across the country completed fixed asset investment of 337.3 billion yuan, an increase of 10.63% over the previous year. The steady progress of rail transit construction is expected to continue to expand the market space of the vehicle operation safety inspection and maintenance industry. In overseas markets, the company has responded positively to the country's high-quality “Belt and Road” strategy. It has successively won bids for international projects such as the Yajiji Railway, the Mongolian Railway, the China-Laos Railway, and the Yawan High Speed Rail, which is expected to open up brand recognition in the international market.
In the aerospace sector, fund-raising projects are about to be implemented, which are expected to benefit from the acceleration of China's star network construction. During the reporting period, the company's revenue from intelligent test and simulation systems and microsystems and control components was slightly under pressure; gross margin was +2.90% year-on-year, rising steadily. According to the “Blue Book on China's Aerospace Science and Technology Activities”, China Aerospace is expected to carry out about 100 launch missions throughout the year in 2024, and several satellite constellations will accelerate network construction. Of these 100 or so launch missions, the Aerospace Science and Technology Group plans to schedule nearly 70 launches, and more than 290 spacecraft will be launched. In this context, the market demand for localized high-reliability, high-performance, miniaturized, and long-life SoC and SiP products is becoming increasingly urgent. Relying on the brand influence of China Aerospace Science and Technology Corporation, the demand for intelligent test and simulation systems, microsystems, and control component products is expected to continue to grow. The company's smart equipment industrial base for satellite applications in Shunyi Aerospace Industrial Park has initially met the conditions for use and is expected to be ready for use on December 31, 2024.
In the field of nuclear industry and automation equipment for special environments, the company is expected to create new business growth points. During the reporting period, the company's revenue from the nuclear industry and intelligent equipment systems for special environments was slightly under pressure, and gross margin was +1.67% year-on-year. With the successful delivery of several non-standard customized system projects, Xuanyu Intelligence, a wholly-owned subsidiary of the company, has officially established its position as a core supplier of intelligent equipment for automated cabinet production lines in the nuclear industry. In the future, the company will continue to make efforts in the fields of next-generation intelligent nuclear industrial robots and special equipment robots.
Profit forecast and investment rating: In 2024, the company is expected to make steady progress in the three major fields of rail transit, aerospace, and nuclear industries. In the rail transit sector, judging from the growth rate of China's railway fixed asset investment in 2023 and railway construction targets from 2023 to 2027, the scale of China's railway construction is expected to continue to expand until 2027. In the aerospace sector, judging from the related transactions disclosed by the company in 2024, daily related transactions are expected to increase by about 19.4% year-on-year in 2024. In the nuclear industry, the “14th Five-Year Plan” issued by the Ministry of Industry and Information Technology and other departments suggests that by 2025, the robot industry's revenue will grow at an average annual rate of more than 20%, and the robot density in the manufacturing industry will double. The intelligent equipment and robot circuit in the nuclear industry where the company is located is expected to usher in a new stage of growth along with the development of China's nuclear industry. Based on the above, we expect the company's net profit to be 0.104/0.125/0.154 billion yuan in 2024-2026, and the corresponding PE in 2024-2026 is 78.8.3/65.4/53.2 times, respectively. Compared with comparable companies Zhenlei Technology (688270.SH), China Weitong (601698.SH), Tianyin Electromechanical (300342.SZ), and Huali Chuangtong (300045.SZ)'s average PE of 133.1/85.4/59.9 times in 2024-2026, the company's valuation was lower than the average valuation of comparable companies. It was covered for the first time, and gave a “gain” rating.
Risk warning: Railway construction investment falls short of expectations; investment in fund-raising projects is delayed; investment in aerospace falls short of expectations; investment in intelligent equipment in the nuclear industry falls short of expectations; macroeconomics falls short of expectations; risk of errors in the quoted data.