Event: the company announced on March 5 that its 2020 revenue was 863 million yuan (+ 8.37%), its net profit was 103 million yuan (+ 4.54%), its gross profit margin was 30.53% (- 0.31pcts), and its net profit rate was 11.98% (- 0.44pcts).
Main points of investment:
The downstream demand of civilian products business is strong, and the growth rate of the company's overall income slows down in 2020. in the context of the global outbreak of COVID-19, the company's operating income (863 million yuan, + 8.37%), gross profit (264 million yuan, + 7.29%), net profit (103 million yuan, + 4.54%) and non-home net profit (97 million yuan, + 10.67%) all maintained steady growth. But the growth rate has slowed somewhat compared with previous years.
Specifically, the company's business can be divided into small solid rocket and extension business (army / civilian), small solid rocket motor core materials and extension business (military / civil), and small solid rocket measurement and control technology extension business (civilian). On the whole, the proportion of the company's military and civilian products revenue in 2020 is about 1VR 3.58, of which the proportion of military products revenue (21.85% mai Lai 12.71pcts) has declined to a certain extent.
The overall revenue of small solid rocket rectifying and extension business (396 million yuan, + 0.09%) is nearly the same as in 2019. As the company's largest business in revenue (45.92%), the business can be divided into two categories: rain-increasing and hail-proof rockets and supporting equipment, and military small solid rockets. Among them, the company's artificial weather influence business continued to grow, promoting the rapid growth of rain-enhancing and hail-proof rockets and supporting equipment (250 million yuan, + 27.79%), while the revenue of military small solid rockets (146 million yuan,-26.97%) declined to a certain extent. the decline is also the main reason for the slowdown in the overall revenue growth of the company's small solid rocket and extension business.
The company disclosed in the prospectus that the amount of goods in inventory of military small solid rockets in 2017-2019 (41.53 million yuan in 2018, an increase of 5689% in 2019 and 515800 yuan in 2019, a decrease of 98.76% over the same period last year) fluctuated greatly, which is due to the fact that the small guided rockets produced by the company have not yet completed the acceptance test. at the same time, the original value of accounts receivable of the company's military small solid rocket business reached 81.7465 million yuan at the end of 2019. An increase of 3609% over the end of 2018, based on the above, we believe that this part of the sales revenue is included in 2019 because the acceptance of the military small solid rockets produced by the company in 2018 has not been completed. this is one of the reasons for the decline in the company's revenue growth in 2020 (the company's military small solid rocket business has a large revenue base in 2019). Overall, we expect that in the context of the current increased intensity of field exercises, domestic demand for small solid rockets as consumables is expected to maintain rapid growth, and the company's business revenue is expected to return to steady growth.
The core materials business of small solid rocket motors is mainly taken care of by the subsidiary Super Code Technology. In 2020, the overall revenue of the business (287 million yuan, + 20.97%) maintained rapid growth, of which, civil carbon / carbon thermal field materials revenue (244 million yuan, + 50.85%) increased significantly, from the carbon / carbon thermal field materials sales volume (264900 kg, + 54.19%) increased significantly. The reason may be related to the increased market demand and abundant product orders in the downstream photovoltaic industry of the company's civil carbon / carbon thermal field materials in 2020. On the other hand, the income of military solid rocket motor ablation resistant components (42 million yuan,-43.56%) has decreased significantly. We believe that it may be due to certain fluctuations in the demand or delivery acceptance of solid rocket models matched by the company's business products at home and abroad.
The extended business of measurement and control technology of small solid rocket is mainly composed of intelligent weighing system, which is mainly taken charge of by subsidiary Sanwo Mechanical and Electrical Co., Ltd., and its income (152 million yuan, + 17.23%) has achieved steady growth in 2020. However, it is worth noting that due to the cancellation of the highway toll station exit weight toll, the company's intelligent weight system production (276 sets,-45.02%) and sales (242 sets,-55.27%) have decreased significantly.
Investment in R & D reached an all-time high, focusing on the cost of the company's progress in capacity expansion. In 2020, the sales expense rate (5.11% quotation 0.34pcts) decreased slightly; the company management expense rate (4.71% meme 0.92pcts) decreased significantly, mainly due to the steady growth of the company's income and the periodic reduction of part of the social security expenses borne by government agencies, and the decline in the total salary of employees. At the same time, as the company repaid some bank loans, revenue maintained a steady growth, and the financial expense rate (0.74% focusing 0.20pcts) also decreased. In addition, the company has increased its R & D investment in various businesses, and under the background of steady growth in revenue, the R & D expenditure rate (6.57% minus 0.77pcts) has still increased, reaching a record high.
In terms of cash flow, affected by the overseas epidemic, the payback cycle of the company's military trade business has been lengthened, resulting in a significant decrease in the net cash flow of operating activities (65 million yuan,-43.75%). This is also one of the reasons for the increase in the balance of accounts receivable (296 million yuan, + 22.30%) in 2020. The cash flow of the company's investment activities (- 34 million yuan,-46.52%) decreased significantly, mainly due to an increase in the company's expenditure on building fixed assets; at the same time, the company completed IPO in September 2020. The placement of fund-raising funds also contributed to the net cash of fund-raising activities to 260 million yuan.
In addition, it is worth noting that in the prospectus in September 2020, the company disclosed that the capacity utilization rate of rain-increasing and hail-proof rockets and carbon / carbon thermal field materials in 2019 has reached 84.20% and 87.69%. With the company's production growth of rain-increasing hail-proof rockets and carbon / carbon thermal field materials reaching 15.30% and 53.82% respectively in 2020, we expect the company's capacity utilization rate to be high. Under the background of the rapid growth of market demand downstream of the industry, the company disclosed that it has successfully passed the on-site verification of the safety conditions of the trial production of the rain-enhancing and hail-proof rocket production line, obtained the approval of trial production, and the production capacity has been further improved. at the same time, the 2021 plan will speed up the progress of capacity expansion construction projects, including the completion of the production line of Yanliang dual-use high-temperature special materials and the realization of production. We suggest that we should continue to pay attention to the implementation progress of the company's capacity expansion projects.
Centering on the application of small solid rocket technology, the company is a military-civilian integrated high-tech enterprise established through restructuring and resource integration on the basis of the civil products industry of the fourth Research Institute of China Aerospace Science and Technology Corporation. The core business development comes from the related business sections of several institutes under the fourth Institute of Aerospace Science and Technology, which can be divided into small solid rocket and extension business, small solid rocket motor core materials and extension business, and small solid rocket measurement and control technology extension business.
① small solid Rocket and extension Service
The company's small solid rocket and extension business can be divided into rain-increasing and hail-proof rockets and supporting equipment, as well as military small solid rockets.
In terms of rain-increasing and hail-proof rockets and supporting equipment, the company's products are mainly used for agricultural disaster prevention and meteorological protection of major activities. As an early enterprise involved in the development of rain-increasing and hail-proof rocket products in China, the company has participated in the drafting of domestic artificial weather rocket standards for many times. high-efficiency multi-purpose rain-enhancing and hail-proof rockets, ground flame sowing systems, vehicle-borne rocket launchers and other company products are the first in China and put into application. In 2020, the company carried out the development and user demonstration test of a new type of shadow rocket; the safety lock successfully passed the technical appraisal and was put into mass production; the forest fire extinguishing bomb was successfully developed and the test effect was recognized; the water enhancement project of the shadow UAV successfully carried out the snow enhancement test, which laid the foundation for the operational use of rain and snow enhancement of UAV. In 2021, the company plans to explore the promotion model of UAV rain enhancement project to form a new revenue growth point, complete the development of forest fire extinguishing bombs, realize batch outfield trials, and complete the development of general standardized launchers to upgrade and upgrade products.
In terms of military small solid rockets, the company's products include sounding rockets and small guided rockets. Sounding rocket is mainly used to detect atmospheric physical parameters within the range of 0~300km altitude, providing data support for weather forecast, atmospheric waveguide detection and near space environment detection, and can also provide a platform for microgravity scientific experiments. At present, the company's sounding rocket development products have formed a series, covering exploration rockets from low-altitude, mid-altitude to near space; small guided rockets are mainly used for anti-terrorism, local war, or border patrol, and the combat targets are mainly light armored vehicles, taking into account general vehicles, simple fortifications, armed personnel, and so on. At present, the company has the first domestic small guided rocket below the 20kg level, which has successfully filled the gap in the field of light guided rocket in China, and established the first-mover advantage and differential competitive advantage of small guided rocket products. In 2020, the small guided rocket project successfully passed the final examination and acceptance; important progress was made in the serialization, low cost and multi-platform development of the small guided rocket project, and multiple scientific research and flight target tests were completed successfully throughout the year; the docking synthesis and multi-flight test verification of a certain type of UAV were completed, and the multi-platform was further expanded and consolidated. Carry out the compatibility design of the sounding rocket, realize the compatible launch function, and successfully win the bid for the sounding rocket construction project of a certain base.
We believe that in terms of civilian products, the company entered this field earlier and has a deep technical accumulation in the field of artificial weather rockets. As the market demand of rain-increasing and hail-proof rockets and supporting equipment is closely related to climate change, and global and regional climate change is cyclical, the industry presents a certain periodicity. However, the company disclosed to the public that its fireworks shadow products have received orders from countries along Belt and Road Initiative, indicating that the company's overseas expansion of the business has achieved certain results. it will help to reduce some of the negative impact of the domestic industry periodicity on the company's rain and hail prevention rocket and supporting equipment business, and the business revenue is expected to maintain stable and rapid growth. In terms of military products, the company relies on the fourth Research Institute of the Aerospace Science and Technology Group, and is one of the few listed companies in China that have the overall research and development capability of small solid rockets. In the Asia-Arab conflict and the US-Iraq conflict in 2020, the combat effectiveness of precision guidance equipment has been verified, and the trade heat of precision guidance equipment in the global arms trade market is expected to be further improved in the future. In this context, although the company's military small solid rocket revenue fluctuated in the short term, in the medium to long term, the company's business revenue is expected to return to stable and rapid growth.
Core Materials and extension Business of ② small solid Rocket Motor
The company's small solid rocket motor core materials and extension business can be divided into two categories: civil carbon / carbon thermal field materials and military solid rocket motor ablation resistant components.
In terms of civil carbon / carbon thermal field materials, the company's products are mainly used in photovoltaic enterprise crystal growth high temperature equipment, which is the key component of crystal silicon growth equipment in photovoltaic industry. At present, the company's carbon / carbon thermal field material products have been widely used by Central shares, JinkoSolar Holding Co Ltd and other leading manufacturers in the domestic photovoltaic industry. In 2020, the company completed the development and delivery of carbon ceramic cylindrical combustion chamber assemblies; at the same time, the new carbon ceramic coating technology was adopted, which significantly improved the apparent quality and service life of mature products, shortened the manufacturing cycle and reduced the cost; the structural transformation of internal heating and melting equipment has been carried out to improve the safety and the stability of the electronic control system. The development of TBC equipment and porous materials is progressing smoothly, which effectively improves the space utilization and gas utilization of the deposition chamber. In 2021, the company plans to carry out the research and development of carbon / carbon brake disc for ARJ21-700aircraft, complete the preparation of the test disc within this year, and pass the ground test, promote the development of aero-engine composite materials and the development of high-performance silicon carbide coating technology and core equipment.
Military solid rocket motor ablation-resistant components, the company's products are mainly used in all kinds of small solid rocket propulsion systems. In 2020, the company broke through the key technologies affecting the ablation performance of throat lining materials for high-pressure engines, realized the independent development and production of molded products, promoted the cost reduction and size amplification of nozzle products, and improved the overall performance of ablation-resistant components.
We believe that in terms of civil carbon / carbon thermal field materials, according to the forecast of China Photovoltaic Industry Association, the newly installed scale of photovoltaic in China will continue to grow in 2021, which may reach 55 gigawatts to 65 gigawatts (an increase of 21.70% wt 25.65% over 2020), and the average annual installed scale of photovoltaic in China may reach 70 gigawatts to 90 gigawatts during the 14th five-year Plan period. The demand for the company's products in this industry is expected to remain high during the 14th five-year Plan period. at the same time, the company is also expanding its application in the field of brakes in the aviation industry. With the increase of the production capacity of this business, the company's civil carbon / carbon thermal field material business income is expected to maintain a steady and rapid growth. The ablation resistant components of military solid rocket motors, as the important core accessories of solid motors, have a strong correlation with the demand of all kinds of military solid rockets. Under this background, although the business income of the company has fluctuated in the short term, however, in the medium to long term, the business income of the company is expected to return to stable and rapid growth.
③ small solid Rocket Measurement and Control Technology extension Service
The products of the company's small solid rocket measurement and control technology extension business are mainly intelligent weighing systems, which are used in transportation departments to implement weight charging, out-of-limit detection, off-site law enforcement and other scenarios. At present, the company's intelligent weighing system products in Shaanxi and Inner Mongolia highway intelligent weighing system market share has occupied more than 30%. The market share of vehicle and axle intelligent weighing system has been expanded to Guangdong, Zhejiang, Fujian, Sichuan, Gansu, Xinjiang, Jiangxi, Henan, Shanxi, Guizhou, Anhui, Shandong and other provinces. In 2020, the company successfully developed a multi-functional high-speed weighing terminal, completed the compilation of off-site law enforcement station-level software, and formed a solution for off-site law enforcement system. In 2021, the company plans to carry out research on optical fiber weighing technology in the intelligent weighing system, actively promote the application of dynamic weighing system with new weighing units as the core, and at the same time, rely on provinces and large enterprise groups with good customer relations, promote the application of intelligent transportation projects, and actively explore the construction, operation and maintenance through the electronic intelligence project.
Integrated mode of operation, rapid expansion of market scale and market share.
We believe that the intelligent weighing system extended by the company based on the measurement and control technology of small solid rockets has a large overall market capacity, but there are many participants and fierce competition. and may be affected by some policy changes (such as abolishing the highway toll station exit weight toll), it is suggested that we should focus on the promotion of the company's new mode of operation and market expansion. At the same time, the company plans to speed up the implementation of the construction project of the production capacity of measurement and control products and arrow-mounted measurement and control systems, and improve the development and production capacity of precision mechanical and electrical products on the projectile. Based on the background of the company relying on the fourth hospital of the Aerospace Science and Technology Group, we expect that, in the future, related aerospace TT & C products are expected to become a new driving force for the company's business performance growth.
Investment suggestion
We believe that as the only listed company platform of the fourth Research Institute of Aerospace Science and Technology Group, the company has been deeply cultivated for many years in the fields of solid rockets, advanced materials, intelligent transportation, and so on. Its products cover both military and civilian use and have the following characteristics:
All the businesses of ① are based on the application of small solid rocket technology, which has a deep accumulation of technology, including human shadow, photovoltaic, intelligent transportation, etc., and the military industry, including small guided rockets, etc., dispersing the risk that the company may be subject to changes in the demand of a single industry or the recognition of military model income, resulting in large fluctuations in performance. ② in A-share listed companies, the company's small guided rocket overall and supporting business has a certain scarcity, in the context of the military trade heat is expected to increase, this business may become an important new revenue growth point of the company. ③ at present, after the company completes the IPO, a number of capacity expansion plans to raise funds are expected to promote the steady growth of the company's business performance in the medium and long term, especially under the background that China Aerospace "14th five-year Plan" period may usher in a highlight moment, the promotion of measurement and control products and arrow measurement and control system production capacity construction project is expected to bring new performance growth points for the company.
Based on the above point of view, we expect the company's operating income from 2021 to 2023 to be 974 million yuan, 1.134 billion yuan and 1.445 billion yuan respectively, the net profit returned to the parent is 115 million yuan, 133 million yuan and 169 million yuan respectively, and the EPS is 0.74,0.86,1.09 yuan respectively, and the current share price corresponds to 69 times, 60 times and 47 times PE respectively.
Risk tips: the installed capacity of the photovoltaic industry is lower than expected, the cross-cycle confirmation of military revenue causes income fluctuations, the company's capacity expansion project is not as expected, the industry competition of intelligent weighing system is intensified, and the company's aerospace TT & C business expansion is not as expected.
