\u3000\u3000 Nancal Technology Co.Ltd(603859) (603859)
There is an urgent need for “virtual manufacturing” in military enterprises. The main reasons are the rapid expansion of production capacity of military enterprises and the increase in the proportion of “positive R & D” of new models. Since the later stage of the 13th five year plan, the upstream and downstream of China’s military industry chain has intensively expanded production, and the scale of projects under construction has continued to grow. One of the key points of capacity expansion is to build digital chemical plants and intelligent institutes and increase the scale of digital investment. The digital construction investment of military industry groups in the 14th five year plan is expected to double compared with that in the 13th five year plan, reaching 200 billion yuan. At the same time, China’s weapons and equipment have entered a “positive R & D” period. Virtual manufacturing can reduce repeated physical tests, reduce trial production costs and risks, and improve development efficiency and quality. For example, the scientific research and production tasks of Hangfa group are very heavy, and there are many new production capacity and new model R & D. the “virtual manufacturing” means such as process simulation, virtual assembly and digital twin test-bed have been applied. Under the background of import substitution, Siemens and other traditional industrial software giants will be gradually replaced by domestic independent and controllable software manufacturers in the military industry, and the company is facing major opportunities.
Occupy the track in advance, from “project system” to “product system”. The company has long participated in a large number of technical demonstration and project approval in the field of military virtual manufacturing, and invested a lot of time, energy and early-stage technical resources. The company’s customers cover major military industrial groups, and the flight test management platform of domestic C919 aircraft is also provided by the company. The company’s expectations for the visibility of future military orders are more accurate. More than half of the company’s technicians have experience in learning / engaging in automation or aviation manufacturing industries, and also have certain software development ability. The biggest barrier of the company lies in the employees\’ understanding and mastery of the development process of complex product models and the accumulation of know-how of military production process. At present, the company is gradually changing to product, platform and cloud service.
Military industry accounted for nearly half of the revenue, with a significant growth rate. Over the years, the company has focused on digital simulation and digital twin technology to provide customers with “virtual manufacturing” services. In 2020, the company’s revenue from the military industry reached 386 million yuan (year-on-year + 85.52%), accounting for 40.55% from 27.17% in 2019, and 45.31% in the first half of 2021. The company’s military revenue is expected to maintain a high growth rate.
Profit forecast: keep the revenue forecast unchanged. It is estimated that the company will achieve revenue of RMB 1.298/17.16/2.193 billion from 2021 to 2023 respectively. Considering the high prosperity of the military industry and the results of cost reduction and efficiency increase, the net profit attributable to the parent company will be increased from RMB 166 / 231 / 298 million to RMB 173 / 243 / 319 million, and EPS will be increased from RMB 0.99/1.38/1.79 to RMB 1.04/1.46/1.91, corresponding to the closing price of RMB 38.60/share on January 7, 2022, PE was 37.12/26.48/20.18 times respectively. Maintain buy rating.
Risk tips: market competition deterioration risk, technological innovation risk and core personnel loss risk.
