Event: the company announced on March 23, 2020 revenue of 357 million yuan (+ 4.33%), net profit of 67 million yuan (+ 30.17%), net profit of 58 million yuan (+ 37.40%) and gross profit margin of 36.76% (+ 3.12pcts).

Main points of investment:

Revenue is limited by the epidemic, and the growth rate of homed net profit is eye-catching: in 2020, the company seized the new market opportunities of epidemic prevention and control and "new infrastructure", went up against the current, and achieved steady growth in its main operating performance. During the reporting period, total operating income was 357 million yuan, an increase of 4.33% (+ 3.53pct) over the same period last year; and net profit was 67 million yuan, an increase of 30.17% (+ 35.95pct). The non-net profit of the home deduction was 58 million yuan, an increase of 37.40% (+ 6.79pct) over the same period last year. The company's revenue increased slightly in 2020, and the return net profit growth rate outpaced the revenue growth rate, mainly due to the impact of the epidemic in 2020, the company's civil aviation air traffic control, military air traffic control, pilot training and other income decreased by 64 million yuan compared with last year, down 23.90% from the same period last year. Some of the artificial intelligence and virtual reality enhancement products independently developed by the company realized large-scale applications in 2020, and contributed 96 million yuan in revenue in 2020, a substantial increase of 336.17% over the same period last year. At the same time, due to the high added value of this part of the product, the company's return net profit still achieved a high growth rate of more than 30% under the influence of the epidemic.

In terms of segments, during the reporting period, the business income of aviation and air traffic control products, artificial intelligence products and services, virtual reality and augmented reality products and services was 1.92 million yuan, respectively. In terms of gross profit margin, the above three parts of business were 42.28% (+ 6.84pcts) / 24.08% (- 6.84pcts) / 43.24% (+ 6.20pcts) respectively.

The military aviation business is about to restart, which is expected to be a new increase in revenue in the future: the company's aviation and air traffic control products were affected by the epidemic in 2020, contract execution was delayed, and revenue fell 6.98% year-on-year. As a well-known enterprise with the largest market share in the field of military aviation air traffic control automation system, before 2013, the military aviation air traffic control business made the greatest contribution to the company's performance growth. however, due to objective reasons such as the reform of the military aviation air traffic control business system, most of the company's military aviation air traffic control projects were suspended, and the company's performance was mainly supported by civil aviation business and flight simulator training business for on-duty pilots of airlines. At present, with the completion of the reform of the military air traffic control system in 2020, the military aviation air traffic control project will resume.

Unilaterally, the "New Generation XX Control Center system" project of the National Air Traffic Control Commission Office, which the company participated in and won the bid in 2013, is expected to resume as soon as possible with the landing of the reform of the military aviation air traffic control business system. In addition, the construction project of a training system of an air force unit with a bid amount of about 39.49 million yuan in January 2021 is also the first of a series of contracts in the 14th five-year Plan. The company's long-term competitive advantage in the field of military aviation air traffic control and the accumulation of related technology will help the company become one of the winners of major contracts for military aviation air traffic control. Under the current international situation, the investment in aviation combat training-related products and systems is expected to increase significantly, and 2/3 of the current military air traffic control equipment is provided by the company, under this background, the company's military air traffic control business is expected to contribute more to the company's performance than civil aviation air traffic control business during the 14th five-year Plan period, and is expected to contribute tens of millions of net profits to the company every year in the future. Further drive the company's aviation air traffic control business to return to the track of rapid growth.

With the large-scale expansion of artificial intelligence business, high-precision 3D face recognition products may become the mainstream of market development: the company's artificial intelligence business has a competitive advantage, with revenue growth of 29.52% in 2020. This part of the business mainly covers high-precision 3D face cameras and high-performance face recognition products, ground-to-air voice recognition and air traffic control command security monitoring, 5G broadband fusion low-altitude surveillance radar network products. Among them, high-precision 3D face recognition products and control security protection system based on automatic speech recognition of air traffic control have been applied in batch. The above new products are the company's exclusive products, and are expected to grow at a high speed during the 14th five-year Plan period. According to the company's announcement, with the further increase in product penetration, the above innovative products are expected to contribute 250-300 million yuan in annual revenue increment to the company, with a growth rate of about 150% and 200%. Specifically, 3D face recognition series products as the core and highlight of the company's development, the depth and accuracy of this series of products can reach 0.036mm and 0.038mm respectively, and the recognition accuracy is in the forefront in the country and even in the world. At the beginning of 2020, the company relies on technological advantages to develop "automatic face recognition with mask" and other technologies and products based on high-precision 3D face recognition technology. It has been widely used in epidemic prevention and control in schools and hospitals. In the future, it will be further expanded to a number of downstream application scenarios, such as Smart City, Winter Olympic Games and so on.

Unilaterally, the company signed the "Traffic violation and accident Detection Project-Expressway package purchase contract" with a total price of 99.0482 million yuan with CLP New Smart City Research Co., Ltd. in 2018, the primary acceptance work was completed in November 2020. delivery is expected at the end of March 2021, which will have a positive impact on the company's 2021 performance. The company developed the first artificial intelligence command security system for large-scale application in the field of air traffic control in the world, that is, "ATC command safety supervision system products based on automatic speech recognition" completed its trial in the civil aviation air traffic control department in 2020. began trial sales, and won contracts of tens of millions of yuan, with the continuous improvement of product technical level and application performance, product penetration is expected to further increase.

The company disclosed its future development prospects, and disclosed its future business development plans in the 2020 annual report. Among them, there is a higher expectation for the military aviation air traffic control company, and it is expected that during the 14th five-year Plan period, its revenue is expected to exceed that of civil aviation air traffic control business. In terms of innovative business, the company expects that the product revenue of high-precision face recognition products, controlled flight training simulators and air traffic control command and safety automatic monitoring system will increase to 2.5-300 million yuan in 2021, with a growth rate of about 150% 200%. The annual profit contribution of civil aviation air traffic control business and virtual and augmented reality products will increase to 20 million yuan and 10 million yuan respectively.

Investment suggestion: based on the above point of view, we estimate that the company's operating income from 2021 to 2023 will be 537 million yuan, 699 million yuan and 902 million yuan respectively, the net profit will be 106 million yuan, 136 million yuan and 172 million yuan respectively, and the EPS will be 0.468 yuan, 0.601 yuan and 0.763 yuan respectively. With reference to the listed companies in the same industry, we will give the company 52 times PE valuation in 2021, corresponding to the target price of 24.34 yuan.

The ratings correspond to 52 times, 40 times and 32 times the projected earnings for 2021-2023, respectively.

Risk hint: the progress of product project research and development is not as expected, and the macro environment is depressed.