The company released the 2020 annual report, realizing operating income of 3.942 billion yuan, year-on-year + 7.39%, net profit of 170 million yuan, + 53.29% year-on-year, and deducting non-return net profit of 111 million yuan, + 64.90% of the same period last year.
During the reporting period, the company's radar business achieved fruitful results, a number of products were delivered and applied; the security system passed the acceptance, and the position of the intelligent industry was consolidated. Taking into account the development prospects of the company's radar and security business, and its position as a platform for the integration of micro assets in the future, maintain the company's "buy" rating.
The new income guidelines affect the substantial increase in revenue from public safety products, and the profitability increases as the expense rate decreases. The company realized 3.942 billion yuan in operating income in 2020, + 7.39% year-on-year, 170 million yuan in net profit, + 53.29% in the same period last year, and 111 million yuan in non-return net profit, + 64.90% in the same period last year. During the reporting period, in part of the system integration business of public safety and energy system business, the revenue recognition method was adjusted from completion percentage to on-time recognition, the revenue recognized in the previous year was recognized in the current period, and the revenue of public safety products increased significantly. The company's overall revenue increased slightly. On the profit side, the gross profit margin of public safety products was reduced by 2.42pcts to 7.17%, and the gross profit margin of radar and ancillary products was increased by 10.63pcts to 34.37%. However, due to the decline in the proportion of revenue from radar and supporting products by 24.87pcts, the overall gross profit margin decreased by 1.38pcts to 17%. The company's borrowing scale expanded, interest expenses increased, financial expenses increased by + 44.50% compared with the same period last year, R & D expenses and sales expenses decreased by 33.61% and 29.03% respectively, and the expense rate during the company period decreased by 1.93pcts to 11.37%. During the reporting period, the company's non-operating income increased by 440.58% to 16 million yuan compared with the same period last year. Combined with various influencing factors, the net profit rate of sales increased by 1.27pcts to 4.42%, and the profitability increased. 20Q4 realized revenue of 2.885 billion yuan, an increase of 33.80%, compared with the same period in the first three quarters, respectively-50.02%, 20.79%, 31.43%, and realized a net profit of 246 million yuan, an increase of 33.85%, accounting for 144.7% of the annual net profit.
21Q1 revenue grew steadily, and the scale effect showed a reduction in the scale of losses. 2021Q1 achieved revenue of 193 million yuan, + 29.30% year-on-year, and a net profit loss of 47 million yuan. Although it did not make a profit, the scale of the loss decreased by 22.89% compared with the same period last year. Benefiting from the increase in the revenue scale of the radar electronics section, the revenue scale of 21Q1 has been greatly improved. On the profit side, the gross profit margin of the company decreased by 7.99pcts to 22.70% compared with the same period last year, and the management expenses decreased by 4.2164 million yuan compared with the same period last year. The scale effect appeared, and the expense rate during the company period decreased by 13.2pcts to 63.97%. In addition, the income from the disposal of the company's assets during the reporting period was 30 million yuan, and the net profit rate was increased by 16.53 pcts, and the loss narrowed to-24.39%.
The company is actively preparing for the growth of inventory, and the cash flow of customers with good credit is expected to improve in the future. At the end of 2020, the company's inventory increased by 19.06% to 1.413 billion yuan compared with the same period last year, of which goods in stock increased by 146.2% to 76 million yuan. The increase in inventory may indicate that the company has sufficient orders on hand and is actively preparing for production. With the promotion of product delivery in the future, the performance will be released gradually. The final accounts receivable was 2.043 billion, + 42.35% compared with the same period last year. Affected by the rhythm of product delivery and revenue recognition, the company's operating cash flow outflowed 109 million yuan in 2020. 21Q1's inventory continued to grow by 26.35%, radar and spare parts procurement and other materials increased by 83.59% compared with the beginning of the period, and the company actively purchased spare products. as a result, the net cash outflow of operating activities expanded by 77.4% to 715 million yuan in the first quarter, taking into account the company's good customer credit and low risk of bad debts, followed by an increase in payback, the company's cash flow is expected to improve.
Rely on independent research and development of products to improve core competitiveness. Centering on radar products, the company continues to innovate in the fields of meteorological radar, air traffic control radar, ground-to-air warning radar and microwave, improve product competitiveness, multi-type product acceptance and delivery, weather radar to achieve full-band coverage, microwave field to complete the microwave circuit board intelligent manufacturing and digital transformation, at the same time actively expand the customer base, in the smart city field security system through acceptance. Considering the high market concentration of radar products, the sound qualification of the company, and the advance layout in the cutting-edge fields such as domestic GaN high-efficiency transmitters and RF direct sampling technology, the company's core competitiveness has been further strengthened and its development advantage is obvious in the long run.
The status of the listing platform is clear, and the injection of high-quality assets is expected. In 2018, China Electric Power Group was established on the basis of eight, sixteen, 38 and 43 companies. On December 31, 2019, the company announced the completion of the change of major shareholders. CLP 38 transferred its 45.67% of the company's shares to CLP Bowei for free, and the company has a clear position as a listing platform for CLP Bowei's operation. CLP Branch 8, 16, 38 and 43 are respectively the authoritative institutions of optical sensing, cryogenic electronics, military radar electronics and hybrid microelectronics in China. In the future, with the steady progress of the restructuring of scientific research institutes and the mixed reform of the group, the high-quality institute assets of CLP Bo Wei are expected to be injected into listed companies, thickening their performance and enhancing the company's core competitiveness at the same time.
Risk factors: the recovery of radar business is not as expected, the bidding for public safety-related products is not as expected, and the capital operation is slower than expected.
Investment suggestion: the company has an obvious competitive advantage in the products with strong technical strength in the radar field, raising the company's 2021 / 22 net profit forecast to RMB 21,000,000 (the original forecast is RMB 180,000,000 respectively), and increasing the net profit forecast for 2023 to 330 million yuan. The current price is 41.31 yuan, corresponding to the PE of 2021-22-23 is twice as much as that of 31-25-20.
Taking into account the development prospects of the company's radar and security business, and its position as a platform for the integration of micro assets in the future, the company will be given a target price of 50 yuan for 37 times PE, in 2021, maintaining a "buy" rating.