Incidents:
The company released a performance forecast for the first quarter of 2021. It is expected to achieve net profit of 15—20 million yuan in the first quarter, an increase of +46.85% to +95.80% over the previous year, and EPS expects 0.10 yuan/share to 0.13 yuan/share.
Investment summary:
The results for the first quarter exceeded expectations, and three years of continuous high growth began. After R&D accumulation in 2017-2019, many of the company's businesses achieved key breakthroughs in 2020. According to the company's performance report, the company achieved revenue of 685 million in 2020, an increase of 71.90% over the previous year, and the net profit of the mother was 110 million, an increase of 819.13% over the previous year. The forecast for the first quarter of 2021 continued this trend. We believe that the company is expected to enter a harvest period in the next three years. Referring to the company's equity incentive target, the next three years are expected to achieve a compound growth rate of more than 44% in the net profit of the mother.
Incentives are sufficient, and optimization of management mechanisms is expected to continue to increase the company's net profit. On March 19, Starnet Yuda announced the 2021 stock option incentive plan. The incentive targets 148 people, including executives and the core team. The option exercise price is 28.50 yuan. It is proposed that no more than 5.414 million stock option rights be granted to the incentive recipients. The performance evaluation conditions are: Based on 2020 net profit, the 2021/2022/2023 net profit growth rate is not less than 50%/100%/200%. As a leading R&D-oriented military digitalization enterprise, the company's incentive mechanism at the beginning of listing gave full incentives and authorization to the R&D team. Most of the core R&D teams held shares in business subsidiaries, forming effective incentives for the team during the business development stage. As the company's business enters a period of transformation and harvesting, management plans to adjust incentive methods, so that the core team can better share the operating results of listed companies while optimizing the equity structure and fee structure of listed companies.
With Tongfang's strategic investment, the company is expected to achieve leapfrog development by relying on state-owned platforms in the future. On February 20, Tongfang Investment announced that Starnet sold 7,734,300 shares at a price of 35.694 yuan/share. After the transaction was completed, Tongfang Investment accounted for 5% of the company's shares. Tongfang Investment is Tsinghua Tongfang's investment platform. The parent company is committed to the transformation and industrialization of China's high-tech achievements. We are optimistic that the company and state-owned military platforms will deepen cooperation in unmanned military business. Follow-up attention was paid to the continuous optimization of the company's equity structure after Tongfang Investment Strategy took a stake.
We have been deeply involved in the intelligent unmanned industrial chain for a long time, and technical reserves have provided the impetus for continuous growth. An intelligent unmanned system is a comprehensive system integrating sensing, control and planning. It is the control core of unmanned combat platforms and has extremely high technical barriers. Since listing, the company has laid out all aspects of the intelligent unmanned system through a series of endogenous and external extension methods, showing high strategic strength. We believe that the company's unmanned system layout has been initially formed, and it is expected that future gains will continue in the fields of unmanned target aircraft, unmanned target ships, electronic combat, unmanned combat vehicles, etc.
Investment advice: We believe that the company is a leading enterprise in intelligent unmanned platforms in China. We are optimistic that the company will use its excellent R&D capabilities and rely on state-owned military platforms to achieve leapfrog development. We expect the company to achieve operating income of 685/10.30/1,490 million yuan and net profit of 1.10/193/277 million yuan in 2020-2022. The current stock price corresponds to PE51x/29x/20x, maintaining the “buy” rating.
Risk warning: The progress of the military goods business fell short of expectations, and revenue confirmation fell short of expectations.