2017 Annual Report and 2018 Quarterly Report:
The company achieved a total operating income of 20,0016 million yuan in 2017, an increase of 9.88% over the same period of the previous year; net profit attributable to shareholders of listed companies was 447.417 million yuan, an increase of 30.69% over the same period of the previous year; basic earnings per share were 0.73 yuan, an increase of 28.07% over the same period last year. The company achieved a total operating income of 396.1004 million yuan in the first quarter of 2018, an increase of 29.32% over the same period last year; net profit attributable to shareholders of listed companies was 5.3939 million yuan, an increase of 20.09% over the same period last year.
The pyrotechnics industry has an outstanding position, and the first-mover advantage of human products is obvious: the company has complete military qualifications, complete pyrotechnics research, production, testing and testing methods, a sound management system for product R&D, production, sales and procurement, and is well known in the military field. Currently, it has established long-term stable cooperative relationships with major equipment factories across the country, and has an important position in the domestic military pyrotechnics industry. The company pays attention to product cost control and has strong profitability. The company is one of the earliest manufacturers in China to artificially influence the weather. It has a first-mover advantage. Currently, customers are spread across more than 20 provinces, cities, and autonomous regions across the country, and have good business relationships with human weather departments at all levels. Currently, efforts are being made to develop new products in the field of portrait equipment combining software and hardware, and profitability is expected to be further enhanced.
The military and civilian series products have a complete system and strong coverage: the company has a wide range of military pyrotechnics products. The product application fields cover the army, navy, air force, rocket force, public security, armed police, etc. At the same time, it is actively cooperating with domestic military trade companies to expand foreign markets; in the field of human imaging equipment, the company has a complete product system around the entire process of man-made weather effects and after-sales service. It covers all aspects of artificially affecting weather explosion equipment, meteorological detection equipment, human image operation equipment, effect evaluation equipment, and information management systems, and the level of product informatization is high.
Focus on technological innovation and cultivate new revenue growth points for the company: by the end of 2017, the company had 44 patents, and the patented technology had all been transferred to production. In 2017, the company invested 12.2036 million yuan in R&D, accounting for 26.87% of net profit attributable to shareholders of listed companies and 6.01% of operating income. Currently, industry-university-research cooperation with research institutes is being actively carried out to develop collaborative innovation, enhance the high added value of products, and promote enterprise product restructuring and industrial upgrading. Efforts are being made to speed up the mass production of new products that have already been defined, and other research projects are progressing steadily, which is expected to generate economies of scale and revenue growth points.
Civil-military integration, two wings are flying in unison: Taking advantage of the policy opportunity period of the military-civilian integration industry, and relying on the advantages of the military industry, the company is focusing on leveraging the advantages of special equipment, consolidating the foundation for civil-military integration, and implementing a development strategy for civil-military integration. It is expected that the company's market adaptability and sustainable development capability will be further enhanced by utilizing the military technology base to develop civilian products, promote and apply advanced civilian technology to military product R&D and production, while simultaneously developing military and civilian goods business, creating a pattern where the military and civilians go hand in hand and fly in unison.
Profit forecasting and investment ratings: In a macro environment where the country is vigorously promoting deep military and civilian integration and military spending continues to grow rapidly, the company continues to step up the development of military and civilian integration projects. Orders for military goods are expected to continue to grow, the proportion of military products with high added value will continue to rise, and projects such as the National Meteorological Security Civil-Military Integration Project will also become new revenue growth points for the company. Taking advantage of the continuous increase in the profitability of military goods and integrated military and civilian products, and the trend of military procurement growing steadily with the increase in military spending, we expect the company's earnings per share in 2018-2020 to be 0.771 yuan, 0.870 yuan, and 0.981 yuan. The corresponding PE is 54.97 times, 48.68 times, and 43.17 times. Combined with the driving effect of competitive equipment procurement throughout the military, we gave the company 60 times PE, the corresponding target price of 46.26 yuan, giving a “buy” rating.
Risk warning: Risks of fund-raising investment projects, risk of renewal of qualifications, security risks, and the speed and results of the promotion of civil-military integration policies fall short of expectations, etc.