Core viewpoints
The company adjusts the industrial structure, increases the proportion of non-nuclear fields, adds new infrared optics and laser devices industrialization projects, expands downstream application business, and enhances core competitiveness and development space. The growth rate of revenue and net profit rebounded in the first quarter of 2020 compared with the same period last year, while the expense rate decreased. We are optimistic about the future development prospects of the company, giving the company a target market capitalization of 6.05 billion yuan in 2020, corresponding to a share price of 44.50 yuan, with a "buy" rating for the first time.
Focus on product structure upgrading, injection infrared laser business. The company is mainly engaged in the research and development, production and sales of processing products of high-performance aluminum alloy materials and its parts, deeply engaged in high-end aluminum technology, and then invested in infrared projects through capital operation to expand downstream application business. The company's traditional business is tilted from the nuclear field to the non-nuclear field, and the advantage of customer diversification is gradually highlighted. The company adjusts its product structure, the overall operating loss narrows, the 2020Q1 expense rate decreases, and revenue increases by 30.35% compared with the same period last year, and is expected to restore profitability in the future.
Traditional business relies on technological innovation to drive development. The company continues to optimize its product structure and expand demand in the non-nuclear sector, accounting for 98% of revenue in 2019. The sales volume of the company's three traditional businesses has increased steadily. Due to the obvious performance advantages of aluminum, it is expected that the development of automobile and aviation will be the driving force of aluminum demand in the future.
Emerging business promotes extension development and enhances market competitiveness. Raise money for the industrialization project of infrared optics and laser devices to realize the integrated development of the military and civilian fields. it is estimated that the global infrared market will reach 18.3 billion US dollars in 2023, and there is plenty of room for growth in Asia. In the military field, the military informatization has led to a continuous increase in the proportion of equipment costs, and the market size is expected to reach US $10.8 billion in 2023; in the civilian field, the development is driven by cost reduction, and the application of security and fire protection is expected to reach US $75 in 2023; in the laser market, the downstream application market is extensive and has a lot of room for development.
Risk factors: the company's infrared project construction is not as expected; the downstream demand of traditional business is not as expected; the risk of raw material price fluctuation.
Investment suggestion: the net return profit of the company in 2020-22 is estimated to be 1.150.142 million yuan respectively, and the corresponding EPS forecast is 1.270.560.34 yuan respectively. Taking into account the PE valuation of the comparable company and the high growth expectations of the company's emerging business in the next few years, the company is valued at 35 times PE in 2020, with a "buy" rating corresponding to the target price of 44.50 yuan for the first time.