Incident: The company disclosed its 2021 semi-annual report on August 26. During the reporting period, the company achieved operating income of 1,157 million yuan (+108.88%), net profit of 275.486 million yuan (+278.91%), basic earnings per share of 0.05 yuan (+400.00%), and gross profit margin of 15.20% (-1.96pcts).
Key points of investment:
The company's performance increased dramatically, benefiting from changes in product sales and structure and the recovery of the civilian goods market in the first half of 2021. The company achieved operating income of 1,157 billion yuan (+108.88%), net profit of 275.486 million yuan (+278.91%), gross profit margin of 15.20% (-1.96pcts), and a net interest rate of 2.38% (+1.07pcts), benefiting from defense product sales and the recovery of the civilian goods market.
The company's prepaid accounts for the current period were 755 million yuan (+1371.33%), and there was a large change, mainly to pay for the construction and progress of the final vehicle assembly. In terms of cash flow, the company's operating cash flow was 909 million yuan, a year-on-year decrease of 472 million yuan. This was mainly due to the receipt of operating payments and progress payments for assembly vehicles at the end of the previous year to supporting units, and the large year-on-year increase in cash for payment of overdue acceptance bills.
Expense side expenses are stable, and the cost rate has decreased significantly. The company's expenses for the current period totaled 68.3010 million yuan (+41.83%), and sales expenses (5.3004 million yuan, +3.18%) and management expenses (71,5713 million yuan, +41.65%) increased dramatically, mainly due to the halving of social security levy in the same period last year, compounded by the year-on-year increase in revenue and employee performance and remuneration for the current period. The absolute value of expenses increased, but the sales expense ratio (0.46%, -0.47pcts) and management expense ratio (6.19%, -2.94pcts) decreased, reflecting a significant increase in the company's operating efficiency. The growth rate of R&D expenses (84.2687 million yuan, +167.40%) was fast. The company's scientific and technological research and development was carried out normally as planned, and key defense research projects progressed effectively by nodes, and 18 patent applications were completed in the first half of the year; in the optoelectronic materials and equipment sector, the “Key Technology and Applications for the Preparation of Special Optical Glass for UHD Imaging” project won the second prize for scientific and technological progress in Hubei Province, and a total of 9 patent applications were completed in the first half of the year.
The company's defense business performance increased dramatically, the optoelectronic materials and devices business promoted product transformation and upgrading, and orders gradually increased
The company's main business segments are defense and optoelectronic materials and devices.
① Defense business
The company's defense products segment is dominated by optoelectronic defense products represented by large-scale weapon systems, precise guidance guides, and optoelectronic information equipment. Revenue achieved during the reporting period was 729 million yuan (+130.70%), accounting for 63.03% of total revenue (+5.96pcts), mainly due to the impact of defense product sales and product structure changes in the first half of the year compared to the same period last year.
Among them, Xiguang Defense, a wholly-owned subsidiary of the sector, achieved operating income of 729 million yuan (+130.82%) and net profit of 8.2604 million yuan (+25.64%); Joint Venture Guidance Company (where the company holds 36% of the shares) achieved operating income of 249 million yuan (+92.75%) and net profit of 18.85,900 yuan (+254.55%). Military performance increased significantly over the previous year. With the mass application of information weapons and the need to upgrade national defense and military equipment, there is a large demand for inventory updates and new products; research institutes under the North Optoelectronics Group provide R&D support, which is a guarantee for product upgrading and development. We believe that Xiguang Defense has fully completed the equipment production tasks, fulfilled the equipment contract with high quality, led to a sharp increase in the company's operating profit, and consolidated the core position of the company's defense business.
② Optoelectronic materials and devices business
The market share of optical glass is stable, and the development of high value-added products has been accelerated. The company's optoelectronic materials and device products include optical materials, optoelectronic materials, components, special materials, optical accessories and other products. It provides more than 140 kinds of environmentally friendly glass, lanthanide glass and low-softening point glass. The products are widely used in consumer electronics, industrial applications, optical equipment, infrared imaging and other fields such as projectors, video surveillance, vehicles, etc. During the reporting period, revenue was 456 million yuan (+80.24%), accounting for 39.43% of total revenue (+17.55pcts), the sector's key company, achieved operating income of 456 million yuan (+80.30%), net profit of 114.1003 million yuan (+3099.51%), and the joint venture Huaguang Xiaoyuan (51% of the company's shares) achieved revenue of 555.713 million yuan (+111.50%), net profit of 277.00 yuan (turning a loss into a profit). The product structure of the optoelectronic materials and devices sector was further adjusted and optimized, and sales revenue of high-value-added products such as infrared materials increased dramatically. Continue to expand the scale of production and sales of high-end optical glass.
Professional optical glass in the optoelectronic materials and devices sector of the company is an important part of the optoelectronic technology industry. Judging from the development trend of the industry, with the upgrading of optoelectronic instrument technology and the continuous development of applications such as urban security, automobile safety, and intelligent driving, various optoelectronic systems continue to be upgraded, and demand for optical glass with high transmittance, high uniformity, high refractive index, ultra-low dispersion, and high-end optical materials such as infrared materials, laser glass, and optical fiber materials continues to grow; the company's market share is firmly ranked second in the country, and is in the top four in the world, and will continue to accelerate outward, fluorophosphorus and fluorine in the future Department High-value-added products such as optical glass are developing, and market development focuses on terminal demand.
Investment advice
We believe that 1) In a situation where the future war pattern evolves at an accelerated pace from mechanization to informatization and intelligent warfare continues to develop, as a core company for optoelectronics and defense systems, as the upgrading and replacement of military equipment for national defense and military equipment accelerates, there is still a large market space in segmented fields. At the same time, in the field of civilian goods, products are widely used in consumer electronics such as projectors, video surveillance, vehicles, etc., industrial applications, optical equipment, infrared imaging, etc., with an international market share of 13% and a domestic market share of 25%, which is expected to further increase market share in the future; 2) The company disclosed that its operating target for the full year of 2021 was 3.09 billion yuan (+24.00%) of military goods, including 2.49 billion yuan (+29.30%) for military goods and 600 million yuan (+12.10%) for civilian goods.
Based on the above views, we expect the company's revenue from 2021-2023 to be 3,092 million yuan, 3,904 million yuan and 4.826 billion yuan respectively, net profit of the mother to be 66 million yuan, 83 million yuan and 95 million yuan respectively, and EPS is 0.13 yuan, 0.16 yuan and 0.19 yuan respectively. We maintain the “buy” rating, with a target price of 13.80 yuan, corresponding to 106 times, 86 times and 73 times PE of predicted earnings for 2021-2023.
Risk warning: the degree of competitive procurement of weapons and equipment is increasing; competition in the optical materials market is intensifying