On February 4, the company disclosed an announcement. The board of directors considered and withdrew the application documents for “issuing shares and paying cash to purchase assets and raise supporting funds and related transactions”. The company's corporate value is facing a revaluation.
The anti-cyclical properties of electricity, railways, and rail transit lays the foundation for the market. China's power grid asset holdings are at a high level and continue to grow rapidly, and the allocation rate of various types of testing and monitoring equipment in power grid companies at all levels is gradually rising. In terms of power testing and monitoring, the company has mastered the full range of equipment and inspection and supervision techniques in various disciplines, and its business is stable. The railway and rail transit sector is mainly railway traction transformers. The subsidiary Yinchuan Wolong is one of the first traction transformer manufacturers to enter the electrified railway market in China. It is also one of the important cooperation units of the former Ministry of Railways in traction transformer technology innovation. It has a high and stable market share in the domestic railway traction transformer market. Three companies, Yinchuan Wolong and Baobian Electric, and China Railway Electric Industry Co., Ltd. have an advantage in the traction transformer market.
The procyclical nature of the military communications sector provides high growth. The company completed the military sector layout through mergers and acquisitions of Dingyi Information and Starwave Communications. The main products of Dingyi Information are optical modules, complete machines and image processing systems. The main products of Starwave Communications are radio frequency and microwave devices and modules. Starwave Communications's main customers are military research institutes, military factories, etc. After years of development, they have won customer recognition and accumulated stable and high-quality military customer resources in their respective fields. Chengdu Dingyi has successfully developed military infrared products, and is expected to use Starwave Communications's mature military market channels to increase military business development efforts. In the context of the introduction of new equipment, the upgrading of old equipment, and military trade in the 14th Five-Year Plan, the company's leaders will fully benefit from the increase in industry sentiment.
Profit Forecast: Adjust the profit forecast for 2021-2022. Revenue from 2020 to 2022 is estimated to be 1,544, 1,790, and 2,132 billion yuan respectively, and net profit of the mother is 243, 303, and 410 million yuan. Currently, PE is 26.10, 20.94, and 15.45 times. From the perspective of segmented valuation, in 2021, the electricity and railway-related sector accounted for 2/3 of the profit, and the military communications sector accounted for 1/3 of the profit. The electricity and rail transit sector was given 15 times PE and the military communications sector 50 times PE. It is believed that the company has a reasonable market value of 8.045 billion yuan, maintaining the “buy” rating. The target price was lowered to 22.34 yuan, and there is still room for growth by 27%.
Risk warning: Systemic risk, order confirmation falling short of expectations, risk of impairment of goodwill.