Key points of investment:
Pioneers in the field of inertia are leading the way, and an inflection point in performance has already arrived. The company is one of the earliest domestic enterprises to enter the field of inertial technology. Over the years, the company has maintained a high level of investment in research and development, continuously driving technology upgrades and product expansion. Currently, the three major business areas are inertial navigation, satellite communication, and intelligent unmanned systems. With continuous breakthroughs in the intelligent unmanned system strategy and the rapid growth of core businesses such as Weitong, the company's performance has reached an inflection point. 2020Q3's net profit increased 1441% year-on-year, forecasting net profit of 120-145 million yuan in 2020, an increase of about 9 times to 11 times over the previous year.
Intelligent unmanned systems are the company's first strategy. Benefiting from practical military training and an increase in the proportion of unmanned equipment allocation, it is expected that an intelligent unmanned combat system will be built in the future. The company's intelligent unmanned system products include unmanned target aircraft, unmanned combat vehicles and unmanned ships. Based on the company's core technical advantages, they have now developed strong competitiveness and obtained large orders. Unmanned aerial vehicles bear the responsibility of the “Blue Army in the Sky”. The company has formed a product system of three types of five target aircraft, which are highly competitive. In 2020, orders totaling 305 million yuan were signed, and the harvest period has officially entered. In terms of unmanned vehicles, intelligent unmanned vehicles are an important trend in the development of weapons and equipment. Compared to the situation where the US military has more than 10,000 equipment and has invested in related research and development over a long period of time, the market space is vast. The company has now received orders. As China's unmanned chariot configuration ratio increases, the company is expected to continue to benefit.
The company is a leader in satellite communications and will benefit from the transformation of military satellites and the broad market space for satellite internet. Currently, military satellite communication systems are in a new cycle of co-feed and transformation from a single band to a dual band. The company's military goods business is expected to achieve a new round of high growth; in the civil sector, satellite Internet is integrated into new infrastructure, and policies have been introduced in many places to promote the development of satellite Internet supporting industries. As an important device for terrestrial personal users and mobile carriers to connect to the satellite Internet, demand is expected to experience rapid growth. Furthermore, the company has already entered the private boat sector and is cooperating with China Mobile and ZTE to promote offshore fishing boat applications. The leading edge is obvious.
The field of inertial guidance is expanding to military products, and will benefit from the rapid development of driverless cars in the future.
The company has been deeply involved in this field for many years. It has achieved self-research on all core devices, completed the opening up of the entire device-component-solution industry chain, and combined Beidou to create a combined navigation system with Beidou. The product system is quite rich. While being based on civilian products, it is actively expanding into the military field. To support intelligent ammunition, etc., medium- and high-precision optical fiber gyroscopes have been mass-produced, and the supporting vehicle inertial guidance project of a certain model has been delivered; the developed MEMS high-precision inertial guidance has gone through multiple rounds of inspection and testing and has entered the stage of centralized modeling and batch delivery; inertial guidance is a standard product for mainstream driverless solutions. The company's penetration rate in the driverless supporting field is about 60%. With the rapid development of the driverless industry, the company will grow with the industry.
Businesses such as photoelectric detection have blossomed in many places. The company closely cooperates with national defense construction needs, completed serial product development in the fields of electronic confrontation, photoelectric detection, etc., and achieved breakthroughs in the fields of drones, customs, border and coastal defense, surveillance, etc., further developing in the direction of military intelligence.
Profit forecasts and investment ratings: Maintain buy ratings. Net profit attributable to the mother in 2020-2022 is estimated to be 146 million yuan, 230 million yuan and 275 million yuan respectively. The corresponding EPS is 0.94 yuan, 1.49 yuan and 1.78 yuan respectively. Corresponding to the current stock price PE is 45 times, 29 times and 24 times, respectively, maintaining the purchase rating.
Risk warning: 1) the development of unmanned systems falls short of expectations; 2) the risk of fluctuations in military goods orders; 3) the development progress of the satellite Internet falls short of expectations; 4) the development of the driverless industry falls short of expectations; 5) systemic risks.