\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 879 China Aerospace Times Electronics Co.Ltd(600879) )
Event: the company announced on March 31 that in 2021, the company’s revenue was 15.989 billion yuan (+ 14.14%), net profit attributable to parent company was 549 million yuan (+ 14.79%), net profit not attributable to parent company was 489 million yuan (+ 20.85%), gross profit margin was 20.07% (+ 1.08 PCTs) and net profit margin was 3.72%, – 0.06 PCTs. In addition, in terms of financial budget in 2022, the company’s revenue budget is 17 billion yuan (+ 6.32%), and the total profit budget is 730 million yuan (+ 14.03%).
Key investment points:
The gross profit margin of the company has reached a new high in recent five years, and the unmanned equipment system business is in a period of rapid development
In 2021, the company’s operating revenue (15.989 billion yuan, + 14.14%) increased steadily, and the growth rate again exceeded double digits after 2017, mainly due to the orderly production and operation of the company and the increase of aerospace products and civil use. Due to the higher gross profit margin (22.62%, + 2.07pcts), the proportion of aerospace product revenue (73.30%, + 1.35pcts) has increased, and the overall gross profit margin of the company (20.07%, + 1.08pcts) has increased steadily, reaching a new high since 2015. However, due to the increase of sales expenses, sales expenses, management expenses, R & D expenses and the reduction of epidemic subsidies, the company’s operating profit margin (3.93%, -0.60pcts) decreased to a certain extent. The company’s net profit attributable to the parent company (549 million yuan, + 14.79%) still maintained a stable growth, and the net profit excluding non attributable to the parent company (489 million yuan, + 20.85%) increased rapidly. We believe that it is mainly due to the significant decrease in the use of income tax (46 million yuan, – 59.26%) under the influence of the change of income tax rebate and R & D expenses plus deduction policies of the company’s subsidiaries.
Specifically, the company’s business can be divided into two categories: aerospace products and civil products. In 2021, the company’s business situation has the following characteristics:
① in terms of aerospace products, the growth rate of the company’s revenue (RMB 11.72 billion, + 16.28%) has increased significantly on the basis of the growth rate of about 10% from 2019 to 2020. Benefiting from the company’s measures to strengthen technological innovation and refined management, the gross profit margin (22.62%, + 2.07 PCTs) also recovered to more than 22% before the epidemic in 2019, reflecting the steady growth of the company’s overall revenue of aerospace products business and the recovery of profitability during the reporting period.
From the performance of several subsidiaries of the company’s traditional aerospace products business, the revenue of the aerospace Long March of the subsidiary engaged in aerospace measurement and control, sensors and satellite navigation related businesses (2.44 billion yuan, + 10.03%) increased steadily, but the net profit margin (5.54%, – 2.96 PCTs) decreased significantly; Aerospace Guanghua, a subsidiary of the company engaged in manufacturing special electronic equipment for missile weapons and launch vehicle control systems, testing launch control systems and platform inertial devices, has seen rapid growth in revenue (1.451 billion yuan, + 25.71%) and a significant increase in net profit margin (4.45%, + 1.30pcts). We believe that it is a reflection of the strong demand and sufficient orders for China’s aerospace equipment such as missiles and arrows in recent years.
Among the subsidiaries of the company in terms of unmanned equipment system business, the revenue of aerospace Feihong, a subsidiary of unmanned aircraft, decreased slightly (780 million yuan, – 10.99%), but the net profit margin (7.41%, + 1.02pcts) increased. We think it may be due to the changes in the product structure and revenue recognition section of the company’s UAV models, The revenue (224 million yuan, + 101.50%) and net profit margin (5.30%, + 0.57pcts) of Feiteng equipment, a subsidiary of precision guidance equipment, have increased significantly. On the whole, the total revenue (1.004 billion yuan, + 1.68%) of the company’s “aircraft” and “missile” subsidiaries has increased slightly, the total net profit (70 million yuan, + 13.69%) has achieved rapid growth, and the net profit margin (6.94%) is far greater than the company’s overall net profit margin (3.72%). It is worth noting that in 2021, the R & D expense rates of aerospace Feihong and Feiteng equipment were as high as 8.45% and 11.19% respectively. Combined with the company’s first release of the “Feihong” UAV brand to the society at the Zhuhai Air Show in 2021 and the strong synergy between UAV and precision guidance equipment, we judge that the company’s unmanned equipment system business is still in the rapid growth period of high R & D investment.
② in terms of civil products, the company’s revenue (4.112 billion yuan, + 10.16%) has achieved stable growth, but it has not yet returned to the pre epidemic level (4.506 billion yuan in 2019), and the gross profit margin (11.32%, -0.51pcts) has decreased slightly, mainly due to the rise of raw material prices, labor costs and other factors.
To sum up, we believe that in 2021, the overall revenue of aerospace products increased steadily, the profitability recovered, and the revenue of civil products business achieved restorative growth. Under the background of the overall high prosperity development of the aerospace industry in recent years, the downstream demand of each aerospace equipment industry is expected to maintain a high level, and the performance of the company’s traditional aerospace industry will also maintain a stable growth trend. However, the company’s unmanned system equipment business is in the stage of rapid development. With the rapid volume of unmanned equipment system business in the next few years of the 14th five year plan, the scale effect is expected to bring sustained and rapid growth of profits, The unmanned equipment system business will gradually become one of the core drivers of the company’s aerospace product revenue and performance growth.
The R & D expense rate has reached a new high in recent years, and the proportion of the two funds is still high, which deserves special attention
In terms of expenses, during the reporting period, under the background of the stable growth of the company’s income, the company’s three fee expense rate (10.94%, + 0.81pcts) increased, among which the company’s sales expense rate (1.98%, + 0.26pcts) and management expense rate (7.40%, + 0.37pcts) increased due to the increase of labor costs; The financial expense ratio (1.56%, + 0.18pcts) also increased slightly, mainly due to the increase of short-term borrowings in the current period, the corresponding increase of loan interest and the increase of financial expenses recognized for lease liabilities in the current period due to the implementation of the new lease standards. At the same time, due to the company’s increased R & D investment and increased expensed R & D expenditure, the R & D expense rate (4.49%, + 0.41pcts) also continued to grow for nearly two years, reaching a new high in recent years.
In terms of cash flow, during the reporting period, the company’s net increase in cash and cash equivalents (- 867 million yuan, – 429.28%) decreased significantly. Among them, the net cash flow from operating activities (239 million yuan, – 50.26%) decreased significantly, mainly due to the increase of various labor costs and taxes paid in the current period; The net cash flow from financing activities (- 575 million yuan, – 342.83%) decreased significantly, mainly due to the increase of short-term borrowings and ultra short financing bonds repaid in the current period and the adjustment of the presentation items of the cash flow statement for rent payment according to the new leasing standards.
In terms of other financial data, at the end of the reporting period, the proportion of inventory and accounts receivable (Liangjin) in the total assets of the company (59.99%, – 0.79 PCTs) decreased slightly, but remained at a high level. The high proportion of Liangjin is also an important reason for the total asset impairment loss and credit impairment loss of the company reaching 114 million yuan (+ 67.67%). We believe that the high proportion of Liangjin still has a great impact on the net profit of the company, It is suggested to focus on.
In addition, the company’s contractual liabilities (2.532 billion yuan, + 42.17%) increased significantly, and the amount of related party transactions is expected to remain at 4.5 billion yuan in 2022, reflecting that the company’s current orders are still full and the high outlook of the downstream of the aerospace industry has not changed.
The company plans to invest in a number of aerospace industrialization projects
The company is a high-tech listed company under Aerospace Hi-Tech Holding Group Co.Ltd(000901) group engaged in the R & D, production and sales of China Aerospace Times Electronics Co.Ltd(600879) professional products. Its main business is the R & D, production and sales of China Aerospace Times Electronics Co.Ltd(600879) , unmanned systems, high-end intelligent equipment, wires and cables.
On December 11, 2021, the company announced that it plans to raise no more than 4.136 billion yuan through non-public offering for the industrialization of intelligent unmanned system equipment, intelligent electronics and satellite communication products, inertial navigation system equipment and supplementary working capital. At present, the company’s non-public offering of shares has been deliberated and approved by the board of directors. In order to speed up the construction of some projects, the company plans to make early investment in some projects with its own funds, which also reflects that during the 14th Five Year Plan period, the downstream demand of the aerospace industry is facing rapid growth, and the company has an urgent demand for the industrialization and expansion of some businesses. The detailed investment direction of the company’s raised funds and the construction of specific projects are shown in the table below.
It can be seen that many projects invested by the company are closely related to the company’s unmanned system equipment, high-end intelligent equipment and China Aerospace Times Electronics Co.Ltd(600879) products. The specific business conditions and our views are as follows:
① unmanned system equipment and high-end intelligent equipment products
The company’s unmanned system and high-end intelligent equipment product business mainly includes system level products and services such as UAV system, precision guidance product system, intelligent perception, special motors and other unmanned and high-end intelligent equipment, which are mainly used in national defense and national economy fields such as national defense equipment, logistics and transportation, intelligent production and security.
The company has deep technical reserves and qualification conditions in the field of unmanned systems and high-end intelligent equipment. The overall technology R & D center of intelligent unmanned systems of Aerospace Hi-Tech Holding Group Co.Ltd(000901) group was approved by Aerospace Hi-Tech Holding Group Co.Ltd(000901) group and entered the trial operation stage. The UAV system has the UAV development and production qualification issued by relevant competent departments. It is the overall development unit of the military UAV spectrum project and the list of qualified suppliers for centralized procurement of UAV system; “Feiteng” series precision guidance products are the only overall unit of Aerospace Hi-Tech Holding Group Co.Ltd(000901) group. The products have obvious advantages of miniaturization, high precision, compound mode, low cost, intelligence, modularization and serialization, and have a certain international popularity; Relying on the company’s professional advantages such as advanced sensors and information communication, the field of high-end intelligent equipment has strong competitiveness in customized support and services and system solutions in relevant fields.
The intelligent unmanned system equipment industrialization project invested by the company with 835 million yuan mainly involves UAV, UAV avionics system and power system, unmanned underwater vehicle and unmanned intelligent support system. We believe that in the 14th five year plan for national economic and social development of the people’s Republic of China and the outline of long-term objectives in 2035, China has clearly put forward the need to accelerate the upgrading of weapons and equipment and the development of intelligent weapons and equipment. As an indispensable modern weapon equipment in contemporary information war, UAV and precision guidance equipment are expected to maintain high-speed growth in China’s demand during the 14th Five Year Plan period. In recent years, the combat effectiveness of the combination of UAVs and precision guided weapons has been verified many times in the Asian Arab conflict, the US Iraq conflict and the Russia Ukraine conflict. At the Zhuhai Air Show in September 2021, a number of unmanned equipment, including UAVs, unmanned vehicles and unmanned ships, were unveiled, which also confirmed that the trade heat of unmanned system equipment in the global military trade market will be further improved in the future.
On the whole, the company’s unmanned system equipment and high-end intelligent equipment are located in an industry with sufficient market demand and profound technology accumulation. The industrialization project of intelligent unmanned system equipment invested by the company will help the company further improve the production capacity of unmanned system equipment and high-end intelligent equipment, and further expand the horizontal and vertical coverage of the industrial chain. Combined with the company’s traditional advantages in supporting relevant subsystems, we judge that the company’s unmanned system equipment products are expected to maintain a rapid development trend during the 14th Five Year Plan period, Referring to the company’s project construction cycle, in the middle and later period of the 14th five year plan, the company’s unmanned equipment system revenue will further usher in a high-speed growth period, which will constitute an important revenue growth point and profit contribution point of the company. At the same time, it will also have a synergistic development effect with the business of the company’s traditional China Aerospace Times Electronics Co.Ltd(600879) products.
② China Aerospace Times Electronics Co.Ltd(600879) product business
The company’s aerospace product business is the R & D, design, manufacturing and sales of China Aerospace Times Electronics Co.Ltd(600879) products, mainly including military and civil measurement and control communication system, remote sensing information system, satellite application and other system level products; Military and civilian inertial navigation products, satellite navigation products, telemetry and remote control equipment, precision guidance and electronic countermeasure equipment, computer technology, software and hardware and other professional equipment; Military and civilian integrated circuits, sensors, relays, electrical connectors, microwave devices, precision electromechanical products and other device products. The products are mainly used in launch vehicles, spacecraft, satellites and other aerospace fields.
From the perspective of the intelligent electronics and satellite communication industrialization project to which the company plans to raise 1.3 billion yuan, the company’s business will further expand to the field of comprehensive electronic information system intersecting military informatization and China Aerospace Times Electronics Co.Ltd(600879) industry. We believe that in the 14th five year plan for national economic and social development of the people’s Republic of China and the outline of long-term objectives for 2035, China proposes to improve the construction level of digital government and accelerate the modernization of national defense and the army, which will stimulate China’s demand for electronic information systems and satellite communication market. On the whole, the aerospace Long March and Shanghai Aerospace, the relevant subsidiaries of the project, have a certain scale (the total revenue in 2021 is about 3.5 billion yuan). From the construction period of the fixed increase project, the business of the company is expected to usher in rapid development in the middle and late period of the 14th five year plan.
The industrialization of inertial navigation system equipment in the company’s fund-raising projects is mainly the inertial navigation devices and system integration in the company’s traditional China Aerospace Times Electronics Co.Ltd(600879) products. It can be seen that the industrialization of inertial navigation system equipment of the company focuses on the improvement of product categories, technology and production capacity. At the same time, the company’s inertial navigation system equipment business also has a collaborative relationship with the unmanned system equipment business. We believe that the market of the company’s China Aerospace Times Electronics Co.Ltd(600879) product business is closely related to the development of China’s major aerospace projects and commercial aerospace, and the China Aerospace Times Electronics Co.Ltd(600879) product business such as aerospace measurement and control communication, electromechanical components, integrated circuit and inertial navigation is the company’s traditional advantageous specialty with strong competitive strength. At present, during the “14th five year plan” period, many major aerospace projects in China are about to be carried out, and the demand for all kinds of aerospace equipment is expected to usher in rapid growth. Under the above background, as a core supporting enterprise in the “national team” of the central Aerospace Military industry enterprise, the business income of the company’s above China Aerospace Times Electronics Co.Ltd(600879) products will maintain stable growth, and the production capacity of unmanned system equipment will be increased due to this fixed increase, It will also further boost the growth of China Aerospace Times Electronics Co.Ltd(600879) product business revenue represented by inertial navigation in the middle and later period of the 14th five year plan.
Following the equity incentive implemented by aerospace Feihong, a subsidiary of UAV business, aerospace Internet of things and Feiteng equipment implemented the equity incentive plan
On December 31, 2020, the company announced to launch equity incentive for aerospace Feihong, a subsidiary of UAV system business. In 2021, the company continued to promote the “double hundred action” reform. Feiteng equipment and aerospace Internet of things implemented equity incentive for core employees, and Feiteng equipment implemented capital increase of original shareholders and strategic investors, accelerating the pace of mixed ownership reform of its affiliated companies.
Overall, the equity incentive of the company’s aerospace Internet of things and Feiteng equipment is expected to further mobilize the enthusiasm of the talent team of the company’s unmanned system and high-end intelligent equipment technology industry, release the vitality of the enterprise, promote the rapid development of the industry and promote the realization of the company’s medium and long-term strategic objectives. As a subsidiary of Aerospace Hi-Tech Holding Group Co.Ltd(000901) group, the company is included in the “double hundred action”
