Incident 1: The company announced on January 14 that the net profit returned to the mother in 2020 is expected to reach 95 million yuan to 100 million yuan, an increase of 29.87% to 36.71% over the previous year;
Incident 2: The company announced an equity incentive plan on January 12. It plans to grant 1.05 million restricted shares to incentive targets, accounting for about 4.74% of the company's total share capital; 1.05 million restricted shares were granted for the first time, accounting for about 3.96% of the company's total share capital, with an initial grant price of 19.21 yuan/share.
Key points of investment:
Focus on the main airborne supporting business: The company's main business is airborne equipment development, maintenance and measurement and control equipment, which mainly serves military customers. Products include helicopter crash resistant seats, protective armor, transport aircraft interiors, etc. According to the company's 2020 mid-year report, the specific business situation is as follows:
① Airborne equipment development (accounting for 70.92% of main business revenue in the first half of 2020): Core products include military aviation seats, cabin equipment, protective armor, radio navigation equipment, etc. Among them, helicopter crash-resistant seats account for more than 80% of the domestic market share in the domestic defense sector; transportation aircraft interior development business leads the market segment; and radio compasses and radio altimeters are the company's traditional advantageous products. In the field of civil aviation airborne equipment, the company's products include kitchen plug-ins, economy class seats, entertainment systems, cabin lighting systems, etc., and continues to deliver domestic ARJ21 jet branch passenger aircraft kitchen plug-ins and other products.
② Aviation equipment maintenance (accounting for 26.22% of main business revenue in the first half of 2020): Engaged in military and civil aviation parts maintenance, general aviation aircraft modifications, and overall aircraft maintenance support, etc., and has maintenance licenses such as FAA, EASA, CAAC and JMM, covering customers including Airbus, Boeing, Embraer, and aviation manufacturers.
③ Measurement and control equipment development: It mainly provides customized support equipment, simulated measurement and control equipment, intelligent workshops (intelligent equipment workshops, intelligent tool cabinets, intelligent spraying) and intelligent storage (automated three-dimensional warehouses) for aircraft manufacturing units, user units and maintenance enterprises. The company has launched an intelligent tool cabinet based on RFID positioning applications and has begun batch delivery.
The forecast performance for 2020 increased by about 30-37%, achieving profit of nearly 100 million yuan: According to the company's performance forecast, net profit returned to the mother in 2020 reached 0.95 million yuan to 100 million yuan, an increase of 29.87%-36.71% over the previous year. Under the epidemic, the company comprehensively promoted the orderly development of work, ensured product delivery and the progress of major scientific research projects, successfully completed the established strategies and annual business plans, and achieved an increase in sales revenue and profits.
The high grant price shows confidence in equity incentives. The target 7-year compound growth rate is about 24%: According to the draft stock incentive plan, the company plans to award 1.05 million restricted shares, accounting for about 4.74% of the company's total share capital.
Among them, 1.05 million restricted shares were granted for the first time, accounting for about 3.96% of the company. The 77 incentive targets were all company executives, middle management and technical backbone. The initial grant price was 19.21 yuan/share (higher than the assessment year of the incentive plan was 2023-2026. The company's performance assessment targets were 200 million yuan, 240 million yuan, 280 million yuan, and 320 million yuan in net profit in that order. As a result, in the four-year period from 2019 (73 million yuan) to 2023, the compound growth rate of net profit reached at least 28.66%; in the seven-year period from 2019 to 2026, the compound growth rate of net profit reached at least 23.51%, which is worth looking forward to.
National defense construction supports the company's steady growth: the international environment is becoming more complex, the growth rate of China's defense investment is likely to be higher than the economic growth rate, and the military industry is expected to maintain a high level of prosperity. Furthermore, the delivery of military aviation equipment is highly planned, and the impact of the epidemic on the overall development of the company's business is limited. The company is positioned as a comprehensive provider of system equipment and technical solutions, and has established a diversified, multi-level and multi-field product platform:
① Helicopter crash-resistant seats, transport aircraft kitchen and bathroom interiors, helicopter protective armor, radio compasses and radio altimeters for some models are preferred suppliers;
② The growth in military products has benefited from the growth of military installations, equipment upgrades, and the localization of core equipment. Civilian goods have also maintained steady cooperation with mainstream aircraft manufacturers and maintenance companies at home and abroad; ③ By exploring customer pain points to develop new businesses, new products such as protective armor business, various navigation systems, and intelligent manufacturing are expected to increase in volume in the future.
Profit forecasts and investment suggestions:
The company focuses on the field of airborne support, and is a leading domestic enterprise in the field of helicopter and transport aircraft support segments. Guided by the goal of “fully building a world-class army”, China will speed up the upgrading of aviation equipment, so that demand for airborne ancillary products continues to grow. As a result, we expect the company's net profit to be 99 million yuan, 136 million yuan and 184 million yuan respectively in 2020-2022, while EPS will be 0.39 yuan, 0.54 yuan and 0.73 yuan respectively. Considering the company's high future growth and strategic value, we gave a purchase rating. The target price was 22 yuan, corresponding to 56 times, 40 times and 30 times PE in 2020-2022, respectively.
Risk warning: customer demand is lower than expected, policy environment changes, new business growth rate falls short of expectations, COVID-19 pandemic, etc.