Event: the company disclosed its 2020 annual report on March 30. During the reporting period, the company realized operating income of 2.492 billion yuan (+ 6.87%), net profit of 51.9001 million yuan (- 16.22%), net profit of 43.5988 million yuan (- 3.96%), basic earnings per share of 0.10 yuan (- 16.67%) and gross profit margin of 13.13% (+ 0.61pcts).
Main points of investment:
The change in delivery mode has led to a lengthening of the revenue recognition cycle, and the performance or future recognition of the company's total assets in the reporting period totaled 5.106 billion yuan (+ 33.24%), mainly due to the change in the delivery mode of final assembly products, from previous bicycle delivery to vehicle system delivery from 2021 onwards, affecting the year-on-year increase in start-up and progress payments for 2021 products paid by the military at the end of 2020. The change in the delivery mode of the company's defense products also affected the company's monetary funds (2.115 billion yuan, + 72.09%) and contract liabilities / accounts received in advance (1.007 billion yuan, + 1114.89%), with inventory of 400 million yuan (+ 11.40%). We believe that the change in the mode of payment will lengthen the revenue recognition cycle of existing orders / existing products, and the performance may be cashed in the future.
The expenditure on the cost side is stable and fluctuates little. During the period of the company, the expense rate was 10.77% (+ 0.82pcts), of which the management expense rate increased by 0.28pcts, which was mainly due to the re-division of the salary collection caliber of the staff and workers, which affected the increase over the same period last year; the sales expense rate decreased by 0.17pcts, which was mainly affected by the decrease in the main business income of the subsidiary Xinhua Huaguang compared with the same period last year; the increase in the R & D expense rate was mainly due to the increase in R & D investment.
The company's defense business is stable, and civilian products are limited affected by the epidemic.
The company's main business is defense and optoelectronic materials and devices two major business sectors.
The defense products of the company are mainly optoelectronic defense products represented by large weapon systems, precision seeker and optoelectronic information equipment. During the reporting period, the income was 1.926 billion yuan (+ 8.46%), accounting for 77.30% of the total revenue, 11.61% of the gross profit (+ 0.90pcts), the operating income of the key company Xiguang Defense was 1.948 billion yuan (+ 8.90%), and the net profit was 33.26 million yuan (- 2.97%). This is mainly due to the impact of product sales, structure and increased investment in research and development. The operating income of the associated enterprise guidance company (the company holds 36% equity) is 347 million yuan (+ 176.57%), and the net profit is 20.7944 million yuan (+ 314.62%), which is much better than that of the previous year.
The company's optoelectronic materials and devices products include optical materials, optoelectronic materials, components, special materials, optical accessories and other products, providing more than 140 environmental protection glass, lanthanide glass and low softening point glass. the products are widely used in projector, video surveillance, vehicle and other consumer electronics, industrial applications, optical equipment, infrared imaging and other fields. During the reporting period, the income was 535 million yuan (+ 0.54%), accounting for 21.48% of the total revenue, the gross profit was 16.66% (- 0.91pcts), the operating income of Xinhua Huaguang Company, a key company in the plate, was 586 million yuan (- 4.40%, which did not offset the income associated with Huaguang Xiaoyuan), and the net profit was 11.6675 million yuan (- 53.18%). This was mainly due to the abnormal shutdown loss of 10.11 million yuan caused by the epidemic. Among them, optoelectronic materials and devices are the company's export products, and the export of optoelectronic materials and devices reached 34 million yuan (- 23.27%) during the reporting period, mainly due to changes in foreign markets.
Xiguang Defense completes the equipment production task in an all-round way, implements the contract with high quality equipment, leads the company to increase its operating profit greatly, tamps the core position of the company's defense business, the company's defense plate products with the mass application of information weapons, as well as the demand for the upgrading of national defense military equipment, there is a large demand for stock renewal and new products; North Optoelectronics Group has scientific research institutes as R & D support, which is the guarantee of product upgrading and R & D.
Optical glass market share is stable, accelerate the development of high value-added products in 2020, the optical glass market basically remains stable, the global optical glass shipment volume of about 25000 tons, sales of about 4.2 billion yuan. The company's optoelectronic materials and devices plate professional optical glass is an important part of the optoelectronic technology industry. from the development trend of the industry, with the upgrading of optoelectronic instrument technology and the continuous development of urban security, automobile safety, intelligent driving and other applications, all kinds of optoelectronic systems continue to upgrade, for optical glass with high transmittance, high uniformity, high refractive index, ultra-low dispersion and special performance. And the growing demand for high-end optical materials such as infrared materials, laser glass, optical fiber materials, etc. The company's market share is firmly in the second place in China and the top four in the world. in the future, it will continue to accelerate the development of high value-added products such as infrared, fluorophosphorus and lanthanide optical glass.
Investment suggestion
We believe that with the accelerated evolution of the form of war from mechanization to informationization and the continuous development of intelligent warfare in the future, as the core company of optoelectronic and defense systems, with the upgrading and upgrading of national defense military equipment, there is still a large market space for subdivision. At the same time, in the field of civilian products, the products are widely used in consumer electronics, industrial applications, optical equipment, infrared imaging and other fields such as projectors, video surveillance, vehicles, etc., with an international market share of 13% and a domestic market share of 25%. It is expected to further increase the market share in the future. The company disclosed that its business target for 2021 is 3.09 billion yuan for main business, including 2.49 billion yuan for military products and 600 million yuan for civilian products.
Based on the above point of view, we estimate that the operating income of the company from 2021 to 2023 is 3.092 billion yuan, 3.904 billion yuan and 4.826 billion yuan respectively, the net profit is 66 million yuan, 83 million yuan and 95 million yuan respectively, and the EPS is 0.13,0.16 yuan and 0.19 yuan respectively. We give a "buy" rating, with a target price of 12.00 yuan, corresponding to 92 times, 75 times and 63 times projected earnings for 2021-2023 PE.
Risk hint: the degree of competitive procurement of weapons and equipment has increased, and the competition in the optical material market has intensified.
