Events:
The company released its third quarterly report for 2020 on October 28, 2020: in the first three quarters of 2020, the company achieved operating income of 1.037 billion yuan, an increase of 8.39% over the same period last year, and a net profit of 225 million yuan belonging to shareholders of listed companies, an increase of 13.67% over the same period last year. In the third quarter of 2020, the company achieved an operating income of 342 million yuan, an increase of 14.67% over the same period last year, and a net profit of 66 million yuan, an increase of 17.20% over the same period last year.
Main points of investment:
The performance is in line with Shenwan Hongyuan's expectations, with a substantial increase in financial expenses caused by convertible bonds and financial lease interest. In the first three quarters of 2020, the company achieved an operating income of 1.037 billion yuan, an increase of 8.39% over the same period last year, and a net profit of 225 million yuan belonging to shareholders of listed companies, an increase of 13.67% over the same period last year. Among them, the company realized operating income of 342 million yuan in the third quarter, an increase of 14.67% over the same period last year, and a net profit of 66 million yuan, an increase of 17.20% over the same period last year. In the first three quarters, the company realized sales expenses of 65 million yuan, down 18.62% from the same period last year; realized management expenses of 57 million yuan, an increase of 14.37% over the same period last year; and realized financial expenses of 88 million yuan, an increase of 275.09% over the same period last year. This is mainly due to the company's payment of interest on its convertible bonds according to the real interest rate and the financial lease interest of the Zhongning wind power project; the sales gross profit margin was 47.6%, an increase of 2.45% over the same period last year.
Benefit from the upgrading of military equipment information, the acquisition of Zhiliang Electronics to strengthen the layout of the military industry. At present, China's military industry is in the upgrading stage of old equipment, which will bring great opportunities for the development of military microwave hybrid integrated circuit related products. Subsidiary Starwave Communications is a well-known enterprise specializing in radio frequency / microwave. During the reporting period, Starwave Communications successively signed two contracts with customers of special institutions, totaling 500 million yuan, accounting for 37.3% of the main revenue in 19 years, one of which began to be delivered in December 20, and is expected to have a positive impact on the company's operating results in 20 and 21 years. In addition, the company plans to buy 100% stake in Zhiliang Electronics, which is a high-quality growth enterprise in the field of radar electronic warfare, which will strengthen the layout of the company's military business and promote its expansion to the lower reaches of the industrial chain.
The demand for distribution automation products has increased, and the technical transformation has realized the intelligent upgrading of the products. At present, China's power assets are in the transition to advanced condition-based maintenance and operation and maintenance, and the proportion of investment in distribution network construction is constantly increasing. In 2019, the proportion of power grid investment of 110 kV and below accounted for 63.3% of the grid investment, an increase of 5.9 percentage points over 2018. The demand for automation products will increase with it.
The company's power equipment condition-based maintenance technology is leading, the product form is complete, the technical achievement is advanced, is expected to fully benefit. The investment process of the wholly-owned subsidiary Hanpu Electric Power "annual production capacity of 24700 sets of distribution automation products expansion and remote technical renovation project" is smoothly advanced, which is expected to achieve the overall improvement of the company's distribution automation product capacity and automation intelligent upgrade.
Maintain profit forecast, maintain "buy" rating: the company is the leader of power detection and monitoring equipment, military electronic information business has entered a stage of rapid development. We maintain the company's profit forecast and estimate that the 20-22 year net profit will be 3.11,4.21 and 505 million yuan respectively, and the corresponding EPS will be 0.87,1.17,1.41 yuan per share, respectively, and the current stock price will be 30,22 and 19 times of PE respectively. Maintain a "buy" rating.
Risk hint: the investment progress of distribution automation is not as expected; the implementation progress of the newly signed contract is not as expected.