The peak order season has arrived as scheduled, and new orders have been intensively released recently, increasing the elasticity of performance in 2021. The pressure on 2020 performance was mainly due to the backward adjustment of overall unit development tasks and the impact of the COVID-19 pandemic, while the high boom in the missile industry chain in 2021 will complement the company's equity incentive assessment goals. Guided by preparations, the company, as a leader in optical missile guidance, is expected to benefit from the main logic of upgrading the inventory and incremental acceleration of guidance solutions.
Revise the company's profit forecast for 2020-2022, maintain the target price of 93.24 yuan, and maintain the “buy” rating.
Net profit attributable to the mother in 2020 is expected to be reduced by about 55.37-66.94%, and the pressure on performance was released. On January 18, 2021, the company disclosed the 2020 annual performance reduction announcement. It is expected to achieve net profit of 0.2-27 billion yuan, a year-on-year decrease of 55.37%-66.94%. The estimated revenue for 2020 is about 120 million yuan, which is also a year-on-year decline, mainly due to the backward adjustment of overall unit development tasks, and the impact of the 2020 H1 COVID-19 pandemic, which delayed delivery and acceptance of simulation, guidance and other products. The high predictability of strong orders also expanded the company's personnel reserves, leading to an increase in management expenses and R&D expenses. This formed a low base for 2020 results, but it also indicates a likely increase in performance in 2021. The revenue assessment targets for restricted stock incentives can be seen.
The peak season for missile orders has arrived as scheduled, and 2021 is expected to have a good harvest. According to the company's recent announcement statistics, the company has won bids totaling more than 120 million yuan in new orders in the past 2 months, accounting for more than 60% of 2019 revenue. Among them, there is no shortage of large-scale projects such as 74.25 million yuan for a certain model of long-wave infrared imaging optical lens and 36.85 million yuan to build an XX system for infrared XX environments. The intensive release of new orders reflects the arrival of the peak season for missile orders. The magnitude of individual orders also shows the company's leading position in the industry. It is worth looking forward to the subsequent landing of orders for the rest of the corresponding models or the rest of the models. We expect the company to usher in a big year of revenue recognition in 2021, and subsequent performance growth will be more elastic.
The direction of preparations for war is clear, and the lead in optical missile guidance has fully benefited from the high demand downstream. The Central Military Commission recently issued the “Outline of Joint Operations of the Chinese People's Liberation Army (Trial)”, which clarifies the goal of strengthening the military and further strengthens the clear direction of war preparations. Missiles are core equipment with strong consumables, and it is expected that the boom will continue to be high for at least the next 3-5 years. As an optical guidance leader in the industry chain, the company will fully benefit from the gradual upgrade of the current stock of missiles to infrared/radar dual-mode guidance, and the new models focus on the demand-side distribution logic brought about by infrared guidance.
Risk factors: The epidemic affected product production and delivery, and capacity expansion fell short of expectations.
Investment advice: The peak order season has arrived as scheduled. Recently, new orders have been intensively released to improve performance flexibility in 2021.
The pressure on 2020 performance was mainly due to the backward adjustment of overall unit development tasks and the impact of the COVID-19 pandemic, while the boom in the missile industry chain in 2021 is expected to complement the company's equity incentive assessment goals. We lowered the company's EPS forecast for 2020-2022 to 0.24/0.99/1.58 yuan (the original forecast was 0.66/1.04/1.63 yuan). The current price corresponding to PE is 211/51/32x, respectively. Since the company's 2021 performance is expected to exceed expectations, and 2021 officially starts the missile industry chain to confirm revenue, the target price is maintained at 93.24 yuan, corresponding to 94 times PE valuation in 2021, maintaining the “buy” rating.