Chengdu Spaceon Electronics Co.Ltd(002935) (002935)
Event: the company announced on December 20 that it planned to carry out equity incentive and grant 5 million shares to 88 incentive objects (about 14.92% of the total number of the company by the end of 2020), accounting for about 2.40% of the total share capital of the company. Among them, 4.6 million shares were granted for the first time, accounting for 2.21% of the total share capital of the company; 400000 shares were reserved, accounting for 0.19% of the total share capital of the company.
Key investment points:
The net interest rate of the company in the first three quarters hit a record high since its listing. The raised investment projects have entered the stage of equipment installation and project acceptance, and the elasticity of future performance is expected to improve
In the first three quarters of 2021, the company’s operating revenue (549 million yuan, + 27.14%) and net profit attributable to parent companies (47 million yuan, + 43.15%) both grew rapidly. Net profit excluding non attributable to parent companies (42 million yuan, + 97.48%) nearly doubled, an increase of 64.44% compared with the first three quarters of 2019 before the epidemic. The company’s net profit rate reached 8.48% (+ 0.95 PCTs), also a record high since its listing.
According to the business data disclosed by the company in the 2021 semi annual report, the company’s products can be divided into frequency series products, time synchronization series products and Beidou satellite application products:
① The revenue of frequency series products (208 million yuan, + 45.23%) increased rapidly, and the gross profit margin (34.22%, – 1.56 PCTs) decreased slightly;
② The revenue of time synchronization series products (RMB 154 million, + 8.02%) continued to grow steadily, but the gross profit margin (21.61%, – 2.57 PCTs) decreased. We think it may be related to the change of the product structure proportion of the business company;
③ The revenue of Beidou satellite application products (4.1713 million yuan, + 119.54%) doubled, mainly due to the company’s Beidou watch launched a variety of new products and the recovery of online business. However, the company’s gross profit margin of this business (19.89%, -4.59pcts) decreased to a certain extent, and the revenue scale is still lower than that of 5.9428 million yuan in 2019h1 before the epidemic.
In conclusion, we judge that frequency series products and time synchronization series products will still be the main components of the company’s revenue and profit in the short term.
In addition, among the projects invested by the company’s IPO funds in 2018, 130 million yuan was invested in the atomic clock industrialization construction project, 173 million yuan was invested in the time synchronization product industrialization project, 154 million yuan was invested in the Beidou satellite application industrialization project, and 66 million yuan was invested in the technology R & D center project. The construction period of the project is one and a half years. However, due to the complexity of infrastructure construction and installation works, covid-19 epidemic situation, new environmental protection policy requirements and other factors, the completion time of each project of the company’s fund-raising projects has been postponed to June 30, 2022. At present, the main infrastructure project of the fund-raising projects has been completed, and equipment installation and project acceptance are being carried out. According to the disclosure of the company’s prospectus, the company had estimated that the production revenue of atomic clock industrialization construction project was 310 million yuan and the net profit was 50 million yuan, and the post production revenue of time synchronization product industrialization construction project was 700 million yuan and the net profit was 66 million yuan; After the Beidou satellite application industrialization construction project reaches the post production income of 484 million yuan and the net profit of 61 million yuan, the above projects can add 1.494 billion yuan to the company’s income and net profit of 177 million yuan, accounting for 163.10% and 175.62% of the company’s income and net profit in 2020 respectively. At the same time, the corresponding gross profit margin (40.13%, 30.18% and 36.23% respectively) of each raised investment project when it reaches production is higher than the gross profit margin of each business of 2021h1 company (34.22%, 21.61% and 19.89%). We believe that if the company’s raised investment project is promoted smoothly, it is expected to gradually bring the growth of performance elasticity and the improvement of profitability to the company in the future.
It is planned to carry out equity incentive, and the development quality and profitability of the company are expected to be further improved
The company announced on December 20 that it plans to carry out equity incentive, To 88 incentive objects (accounting for about 14.92% of the total number of the company at the end of 2020), 5 million shares were granted, accounting for about 2.40% of the total share capital of the company. Among them, 4.6 million shares were granted for the first time, accounting for 2.21% of the total share capital of the company; 400000 shares were reserved, accounting for 0.19% of the total share capital of the company. According to the performance conditions of the company when the restricted shares were unlocked, the conditions for the first grant are: three meetings during the lifting of the restriction period In the current year, the return on net assets of the company shall not be less than 7.50%, 8.00% and 8.50% respectively, and the compound growth rate of net profit not attributable to the parent company compared with 2020 shall not be less than 15%. With reference to the company’s return on net assets (net / weighted) of 6.57% in 2020, we judge that the company’s profitability is expected to be gradually improved in the future.
In addition, the company is a listed company affiliated to China Electronics Technology Group. In 2021, China Electronics Technology Group showed a positive attitude of capital operation, such as Hebei Sinopack Electronic Technology Co.Ltd(003031) IPO, Guobo electronics’s proposed IPO, Cetc Digital Technology Co.Ltd(600850) proposed asset injection, Phenix Optical Company Limited(600071) proposed asset injection, acousto-optic technology’s asset injection, etc. at the same time, in the second half of 2021, the company and Cetc Digital Technology Co.Ltd(600850) , Sun Create Electronics Co.Ltd(600990) also launched equity incentive plans one after another. In combination with the implementation opinions of China Electronics Technology Group Co., Ltd. on promoting the high-quality development of listed companies recently issued by China Electronics Technology Group, highlighting the development positioning of the group’s holding listed companies as “the main position of industrial development, the main force of asset preservation and appreciation, the main channel of external financing and the main platform for system and mechanism innovation”, we believe that, 2022 will be the last year of the three-year action plan for the reform of state-owned enterprises. All military central enterprises have successively proposed to accelerate the implementation of the three-year action reform task. The company is also expected to carry out more reform measures under the background of China Electronics Technology Group’s vigorous promotion of reform, so as to further improve the development quality and profitability of the company.
A number of financial data show that the company has increased its procurement and production efforts and is expected to achieve performance in the future
In terms of expenses, in the first three quarters of 2021, under the background of rapid growth of the company’s revenue, The company’s three fee expense rate (12.06%, + 0.15pcts) increased slightly. It is worth noting that due to the increase of transportation expenses, advertising expenses and business publicity expenses, the company’s sales expenses (25 million yuan, + 62.06%) increased significantly. We believe that this also means that the company has strengthened the sales promotion of products, which will be conducive to the growth of the company’s sales revenue in the future.
In terms of cash flow, the company’s net cash flow from operating activities (- 104 million yuan) increased by 126 million yuan over the same period last year, mainly due to the increase in cash received from the company’s sales of goods, and the sharp decrease in net cash flow from investment activities (- 57 million yuan, – 208.68%), mainly due to the decrease in cash recovered due to the company’s financial investment and the increase in investment in raised investment projects.
In terms of other financial data, at the end of the third quarter of 2021, the company’s sales collection rate decreased, The scale of accounts receivable (579 million yuan, an increase of 45.23% over the beginning of the period) reached a record high since the listing, but the company’s long-term aging accounts have been recovered, resulting in credit impairment losses (675700 yuan, – 89.94%) decreased significantly compared with the same period in 2020. Combined with the company’s interim report data, the relevant accounts receivable of military customers, military central enterprises and subordinate units accounted for more than 80%. We expect that such accounts receivable are less likely to form bad debts. In addition, according to the contract orders and production plans, the company has increased the purchase of raw materials and accounts payable (366 million yuan, an increase of 101.80% over the beginning of the period) and inventory (740 million yuan, an increase of 57.36% over the beginning of the period). We believe that this is also a strong circumstantial evidence that the company’s orders on hand are sufficient and are expected to be cashed into the income statement in the future.
The company focuses on the field of military and civilian time and frequency, and makes a breakthrough in the expansion of military products market
The company is mainly engaged in the R & D, design, production and sales of time-frequency products (divided into frequency series and time synchronization Series) and Beidou satellite application products. It is a high-tech enterprise with national enterprise technology center, a number of patents and core technologies. The company has “device component equipment system” A complete time-frequency product line can provide complete time-frequency solutions. The main products include atomic clocks, crystal devices, frequency components and equipment, time-frequency boards and modules, time synchronization equipment and systems, etc. the products are mainly used in aerospace, satellite navigation, national defense equipment, military and civil communications and other fields.
① Frequency series products
Frequency series products generate various frequency source signals required by electronic equipment and systems by generating and processing frequency source signals. The main products include atomic clocks, crystal devices, frequency components and equipment. The company’s frequency series products include “device component equipment”, with frequency coverage of 5MHz ~ 18GHz and frequency stability coverage of 10-5 ~ 10-14.
In terms of atomic clocks, the company is a major batch manufacturer of atomic clocks in China, and its technical performance has reached the international advanced level. It has successively launched a series of rubidium atomic clocks that meet the needs of aerospace, satellite navigation and military and civil communications. The spaceborne atomic clock physical system developed and produced has been applied to the beidou-3 navigation satellite system; CPT atomic clock has realized small batch production and sales; The laser pumped small cesium atomic clock won the innovation Gold Award of the 20th China International Industry Expo in 2018. In 2019, it was selected into the recommended list of timekeeping clocks of the International Bureau of measurement (BIPM). It is qualified to provide data for the international time benchmark Tai (International Atomic Time). It is the only commercial atomic clock selected into the timekeeping list of the International Bureau of measurement in China.
In terms of piezoelectric crystal devices, the company is one of the main research and production units in China. It participates in the formulation of a number of national standards for crystal components, focuses on the development of medium and high-end crystal devices, has a full range of products such as SMD crystal oscillator, temperature compensated crystal oscillator, constant temperature crystal oscillator and crystal filter, and maintains the international advanced level in ultra-low phase noise technology, impact vibration resistance technology and high-frequency broadband linear phase technology. In recent years, the company has continuously promoted the localization and substitution of crystal devices, continued the construction of conditions, and steadily increased the production capacity and output.
In terms of core frequency source products, the company has independent R & D and production capacity. The technical performance of frequency components and equipment formed on this basis is leading in China, and can be applied to airborne, ground, vehicle, shipborne and other platforms. The products are widely used in many major national defense projects.
② Time synchronization series products
Time synchronization series products provide unified time and frequency source signals for each application system by receiving, generating, maintaining and transmitting standard time and frequency source signals. The company is a major supplier of military time synchronization products. Time synchronization products include “board module equipment system”. Time synchronization accuracy ranges from milliseconds to nanoseconds, providing comprehensive products and services for various time-frequency applications.
The company is a major supplier of military time synchronization products, including time-frequency boards and modules, time synchronization equipment and systems. It is mainly used in aerospace, satellite navigation, military and civil communications, national defense equipment and other fields, providing important support for national major projects such as national time-frequency system construction, manned spaceflight, lunar exploration project, Beidou satellite navigation system, Mars exploration and so on.
③ Beidou satellite application products
The company’s Beidou satellite application products are based on Beidou satellite navigation system and integrate communication, Internet and other technologies to meet the needs of customers in time service, positioning and emergency early warning communication. The main products include Beidou satellite watch, Beidou application terminal and system.
Specifically, in terms of Beidou satellite watches, the company is a major supplier in both military and civil segments, and won the title of “China’s famous watch brand” awarded by China Watch Association. This year, the company focused on marketing planning for the civil market, and has released a number of new watches, further strengthening the company’s competitive strength in the civil field; In terms of Beidou application terminal and system, Beidou meteorological emergency early warning communication system has carried out system construction and demonstration application in Shanxi, Fujian, Sichuan, Xinjiang and other places.
Currently, Company’s time frequency products (frequency series and time synchronization Series), atomic clocks, crystal filters, crystal oscillators and other products continue to track the localization needs of various military arms and military industrial groups, and the market orders continue to grow; chip atomic clocks have successfully entered new application fields after nearly two years of product improvement and market promotion. In the future, the company will continue to develop products with lower power consumption and smaller volume Product; Rubidium clock, cesium clock, adjustable duplexer and other time and frequency products are continuously supplied to Huawei; The time synchronization products won many time-frequency application demonstration projects, which further consolidated the company’s industry position in the military time-frequency field, and successfully completed the major space mission support of “Tianwen” and “space station”.
The demand side is driven by the dual logic of “equipment demand improvement” and “domestic substitution”, and pays attention to the capacity improvement brought by the company’s raised investment projects
On the whole, we believe that the business of time and frequency products (frequency series and time synchronization Series) will still be the main revenue composition of the company in the short term. The views of demand side and supply side are as follows:
On the demand side:
① As one of the core devices of military and civil electronic information systems, high-precision time-frequency products represented by atomic clocks are widely used in military fields such as aerospace, precision strike and cooperative operations, as well as civil fields such as communication, electric power, transportation and finance;
② In the military field, in the modern war, the importance of coordinated operations among various arms and weapons and equipment is becoming more and more prominent. With the current military increasing the intensity of actual combat exercises, the actual combat training leads to increased wear and tear, and the war preparation needs lead to rapid quality and quantity improvement of weapons and equipment, the demand for information-based weapons and equipment such as aerospace will also grow rapidly;
③ In the civil field, the promotion of new infrastructure such as 5g / Internet of things is also expected to form a new market downstream of time-frequency devices;
④ Due to the late development of China’s time-frequency industry and relatively weak foundation, some high-end products still rely on imports. The domestic substitution of such high-end time-frequency devices will also bring additional market space increment to the company’s products.
To sum up, we believe that the increase in the overall demand space of information weapons and equipment and the additional incremental market space formed by domestic substitution will be the core factor for the demand growth of the company’s time-frequency device products during the 14th Five Year Plan period, and will also be the core logic for the company’s performance to maintain rapid growth.
On the supply side, as one of the few atomic clock R & D and production enterprises in China, during the “14th five year plan” period, under the background that the downstream demand is expected to maintain rapid growth, with the gradual implementation of the company’s fund-raising projects, the production capacity of CPT atomic clock, laser pumped small cesium atomic clock, time-frequency board and module, time synchronization equipment and other time-frequency products has increased, It is expected to gradually bring the growth of performance elasticity to the company in the future, and the scale effect is also expected to bring the improvement of profitability to the company’s current main business.
Investment advice
The company is a listed company platform of the 10th Research Institute of China Electronics Technology Group. The 10th Research Institute of China Electronics Technology Group is the first comprehensive electronic technology research institute established after the founding of new China. It is a national first-class scientific research institution, mainly engaged in the development and production of electronic system engineering and equipment in the fields of avionics, China Aerospace Times Electronics Co.Ltd(600879) , communication, reconnaissance and countermeasure, identification, radar and so on, All professional fields are in a leading and leading position in the same industry in China, with a net profit of 762 million yuan in 2019 (6.84 times of the company’s net profit attributable to the parent company in 2019).
