Main points of investment
The market development efforts continue, and the performance is in line with expectations. In the first three quarters of 2017, the company realized operating income of 245 million yuan (year-on-year + 81.8%), belonging to the parent company's net profit of 28.39 million yuan (turning losses to profits over the same period last year) and realizing EPS0.12 yuan. Among them, the operating income in the third quarter was 64.05 million yuan (+ 12.91% compared with the same period last year), belonging to the parent company's net profit of 8.02 million yuan. The company's military business steadily improved in the first three quarters, with military revenue reaching 95.4758 million yuan, an increase of 6098.92% over the same period last year. At the same time, active layout of the civilian products market has formed five major business sectors, and the company's comprehensive profitability has been improved.
With the rapid development of military business, continuous wave radar system has become a new growth point. The company has actively developed the military market in the first half of the year and has signed a number of purchase orders with military customers, involving man-portable air defense missile combat command systems, ground reconnaissance systems, ground detection radars and other military products. After the continuous wave radar project reaches production at the end of 2017, the production capacity of core components such as man-portable air defense missile command system, regional counter-offensive group communication command system, radar and so on will be greatly increased, and the company's profitability will continue to increase.
Actively lay out the field of civilian products and embrace the broad market space. At the end of last year, the company formulated a new development strategy and actively promoted the process of civilian use of military products, adding a new civil business section based on integrated electronics, intelligent security, intelligent coastal defense and communications electronics. Since the beginning of this year, relying on the company's technical advantages in the military field, the research and development of related civilian products has been progressing smoothly. Among them, air traffic control radar, ground reconnaissance surveillance radar, ground reconnaissance command system, and multi-model underwater autonomous aircraft and other products have completed prototypes. At present, the company has signed a number of purchase orders in the field of civil navigation and intelligent security, and we expect that after the amount of investment. The company's civil products will have a lot of room for development.
We will extensively carry out in-depth cooperation and deepen the sharing of resources and technology. This year, the company has formed a close strategic partnership with Electronic Technology Group and China Arms Group, and has carried out in-depth cooperation with Guoxin Holdings, Shipping Group, Aerospace Science and Industry Group and other companies to further deepen the sharing of resources and technology. And plans to join with four other enterprises to set up a Shaanxi civil-military integration aviation industry investment fund with a target scale of 3 billion yuan. The strategic layout of the company's civil-military integration has been further promoted, and its comprehensive competitiveness has been enhanced.
Continue to promote resource integration, reduce burden, increase quality and enhance the competitiveness of the company. The company is also actively engaged in internal resource integration. In the third quarter, it has announced that it intends to invest 40 million yuan to set up Tianhe Innovation Institute, and intends to transfer 3.6 million shares of the participating company Shanghai Smart, and the holding subsidiary Tianhe Haiphong contributed 20 million yuan to set up a wholly-owned subsidiary, Zhejiang Haina. In addition, the company plans to transfer 80% of the equity of Tianhe Innovation Institute. If the transaction is finally concluded at no less than 145.6 million yuan, it is expected to generate a profit of 113.6 million yuan, which will have a positive impact on the company's annual performance in 2017. Through continuous capital operation, the company can reduce the operating burden and improve the asset quality of the company.
Risk factors: the progress of military reform is not as expected; the progress of military market expansion is not as expected; the expansion of civilian business market is not as expected.
Profit forecast, valuation and investment rating. Taking into account the company's business expansion and the uncertainty of the external environment, we maintain the company's forecast of 0.16 EPS 0.19max 0.24 yuan in 2017-18-19, the current share price is 24.31 yuan, corresponding to the 2017-18-19 annual PE score of 152 128max 101 times. Taking into account the future development prospects of the company's business and the continuous promotion of civil-military integration, maintain the "overweight" rating, with a target price of 32 yuan.