\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 050 Chengdu Rml Technology Co.Ltd(301050) )
Event: the company announced on April 25 that in 2021, the revenue was 735 million yuan (+ 114.90%), the net profit attributable to the parent company was 202 million yuan (+ 66.33%), the net profit not attributable to the parent company was 182 million yuan (+ 56.20%), the gross profit margin was 42.39% (- 14.31 PCTs), and the net profit margin was 27.42% (- 8.01 PCTs). In 2022q1, the revenue was 225 million yuan (- 17.12%), and the net profit attributable to the parent company was 107 million yuan (+ 35.12%).
Key investment points:
The revenue and net profit attributable to the parent company have achieved rapid growth. The scale effect in 2022 is expected to promote the recovery of profitability. In 2021, the company's operating revenue (735 million yuan, + 114.90%) has increased significantly. We believe that the main reason is that the models supporting some products of the company have entered the stage of batch production and volume, and the gross profit margin (42.39%, - 14.31 PCTs) has decreased significantly, We believe that it may be related to the downstream demand of the company's supporting products showing the characteristics of "quantity for price". In terms of profitability, although the company's expense ratio (12.38%, - 4.09pcts) decreased significantly during the period, and the company's other income (21 million yuan, + 280.71%) also increased significantly, under the influence of the significant decline of the company's gross profit margin and the significant increase of income tax (33 million yuan, + 246.76%), the growth rate of the company's net profit attributable to the parent (202 million yuan, + 66.33%) lagged behind the growth rate of income, and the net profit margin also decreased significantly by 27.42% (- 8.01pcts).
In 2022q1, the company's operating revenue (RMB 225 million, - 17.12%) declined, but the gross profit margin (48.06%, + 4.27pcts) increased. We think it may be related to the scale effect brought by the company's capacity improvement, while the company's net profit attributable to the parent company (RMB 107 million, + 35.12%) increased rapidly. We think it is mainly due to the decline of the company's expense rate during the period, the receipt of sales receipts and the write off of bad debt reserves, Credit impairment losses (offset back by 22 million yuan, a decrease of 37 million yuan compared with 2021q1) decreased significantly.
As for the company's two main businesses of precision guidance and communication data link, the situation in 2021 is as follows:
① precision guidance business is the company's main source of revenue (accounting for 97.61%), with a significant increase in revenue (717 million yuan, + 126.58%), and a significant decline in gross profit margin (41.79%, -14.09pcts), which is basically consistent with the overall revenue and gross profit margin of the company.
② the revenue of communication data link business accounts for a relatively small proportion, with a decrease in revenue (16 million yuan, - 10.71%) and gross profit margin (69.20%, - 6.85 PCTs).
In addition, in February 2022, the company disclosed that it had signed two ordering contracts for a certain supporting product with customers, with a total contract amount of 2.407 billion yuan, which is 327.47% of the company's revenue in 2021. The delivery of the subject matter will begin in 2022. The company also disclosed that by the end of 2021, the corresponding revenue of the performance obligations that had been signed but not yet performed or not yet performed was 490 million yuan, and the revenue will also be recognized in 2022. The above orders highlight that some of the supporting models of the company have entered the stage of batch production and volume, and the company's revenue has maintained rapid growth during the 14th Five Year Plan period.
According to the IPO funds raised by the company, the net IPO funds raised by the company reached 1.358 billion yuan (including 728 million yuan of over raised funds), of which 225 million yuan was invested in the construction project of technological transformation and capacity expansion of production base (the construction period is 2 years), 205 million yuan was invested in the construction project of R & D center, and 200 million yuan was used to supplement working capital (in addition, 218 million yuan of over raised funds will be added to permanently supplement working capital). We believe that when some of the company's current supporting models enter the stage of batch production and volume, the capacity improvement and scale effect brought by the technological transformation and capacity expansion project of the production base will be an important guarantee for the rapid growth of the company's revenue in the future, and will also be an important influencing factor for the company to maintain its gross profit margin at a certain height under the background of "volume for price" in the downstream. It is suggested to focus on it.
In conclusion, we believe that in 2021, benefiting from the batch production and volume of some supporting models of the company, the company's precision guidance business will be the core driving force for the rapid growth of revenue and net profit in the next few years of the 14th five year plan. Although the company's revenue decreased briefly in 2022q1, we believe that it is mainly due to the delay in product delivery confirmation caused by the epidemic, and the company has entered the general trend of development harvest period. In addition, the company's gross profit margin declined significantly in 2021, but improved in 2022q1. Combined with the gradual promotion of the company's capacity expansion project, the scale effect is expected to lead to the gradual decline of marginal cost, and the decline of gross profit margin is expected to be gradually improved.
The net cash flow of annual operating activities turned negative to positive for the first time, focusing on the improvement of capacity delivery capacity and gross profit margin
In terms of expenses, in 2021, under the background of rapid growth in revenue, the company's three fee expense rate (7.81%, - 2.48 PCTs) decreased significantly, of which the sales expense rate (1.83%, + 0.09 PCTs) was the only increased expense rate, which was mainly due to the increase in sales revenue and the corresponding increase in the accrued warranty deposit. In addition, the rapid growth of the company's R & D expenses (RMB 34 million, + 58.87%) is mainly due to the increase of R & D investment. From the perspective of the company's current main R & D projects, most of them focus on the improvement of product capacity and cost performance, which will help the company continue to improve its technical competitiveness and gross profit margin in the field of millimeter wave microsystems. At the same time, the number of R & D personnel of the company (84, + 27.27%) maintained a rapid growth, which also shows that the company is in a period of rapid development.
In terms of cash flow, in 2021, the company's net cash flow from operating activities (91 million yuan, an increase of 135 million yuan compared with 2020) increased significantly, and the annual net cash flow from operating activities was positive for the first time, mainly due to the smooth progress of mass production and delivery, the expansion of sales revenue and the increase of sales receipts; The net cash flow from investment activities (- 1.141 billion yuan, - 449751%) decreased significantly, which was mainly due to the company's planned production expansion, high investment in fixed assets in the current period and active cash management of temporarily idle funds; The net cash flow from financing activities (1.321 billion yuan, + 292115%) increased significantly, mainly due to the company issuing new shares and raising net funds of 1.358 billion yuan.
In terms of other financial data, at the end of 2021, the company's inventory (RMB 571 million, + 84.12%) increased significantly, of which the goods issued reached RMB 204 million (+ 275.04%), which is expected to be quickly cashed in to the income statement in 2022. At the same time, the raw materials (RMB 194 million, + 32.45%) and products in process (RMB 140 million, + 56.72%) increased rapidly, and the company's contract liabilities (RMB 130 million, + 292.90%) increased significantly. At the end of 2022q1, The company's inventory increased again to 651 million yuan, and the contract liabilities increased significantly to 363 million yuan. We believe that the above financial data strongly confirm that the company has sufficient orders on hand and is actively preparing for production. We believe that with the promotion of the company's technological transformation and capacity expansion projects, the improvement of the company's capacity delivery capacity and the improvement of gross profit margin deserve special attention.
An important supplier of precision guided weapons, we have accumulated a lot and ushered in the harvest period
The company is a high-tech enterprise engaged in the R & D, manufacturing, testing and sales of millimeter wave active phased array micro system, providing special and general millimeter wave active phased array products. Products and technologies are widely used in precision guidance, communication data link, radar detection and other special fields. In the future, they can also be extended to 5g communication base station, on-board unmanned radar, commercial satellite link system, mobile terminal "communication in motion" and other general fields.
① precision guidance products
The company's precision guidance products mainly include millimeter wave active phased array micro system and high-frequency millimeter wave front-end. The final product of this kind of products is precision guidance missile. According to the company's prospectus, the company is the only supplier in the supporting process of multiple precision guidance models. We believe that driven by the demand for "consumptive supplement of mature models of equipment" and "finalized mass production of new models of equipment", the downstream demand for complete sets of weapons and equipment such as missiles in China is strong, and the supporting demand in the middle and upper reaches of the industrial chain is expected to maintain a high growth rate. From the company's prospectus and major contracts disclosed, some missile models supporting the company in recent years have been finalized and entered the stage of mass production. We judge that the approximate rate of precision guidance products during the 14th Five Year Plan period is the main source of the company's revenue growth.
② communication data link products
The company's communication data link products include spaceborne millimeter wave active phased array micro system and airborne data link phased array micro system. The company's communication data link products are mainly applicable to high-value application scenarios such as inter satellite link and airborne satellite communication. The company has experience in the design and manufacturing of aerospace grade phased array micro system products, and the company has experience in the on orbit operation of aerospace grade products.
We believe that satellite Internet is an Internet broadband service mode with satellite as the access means, and its essence is an important derivative application in the field of satellite communication. Due to the possible limitations of global ground station distribution and lack of frequency resources, the inter satellite link communication technology may become the core technology affecting the development of China Spacesat Co.Ltd(600118) Internet industry from the actual situation of China. With the construction of the infrastructure of China's LEO Satellite Internet space segment in the middle and late period of the 14th five year plan, the company's communication data link products are expected to become a new bright spot of revenue growth in the future.
IPO will carry out strategic placement for senior executives and core employees to stimulate the innovation vitality of listed companies
In 2021, the company launched a strategic placement for senior executives and core employees during its IPO. Among them, the company's senior managers and core employees (10 in total) participated in the special asset management plan established by the strategic placement, and finally received 2394500 shares, accounting for 9.89% of the issued shares. We believe that carrying out strategic placement during IPO can deepen the binding between the interests of senior executives and core employees and the interests of the company after the company is listed, which will help stimulate the innovation vitality of the company and promote the realization of the company's medium and long-term strategic objectives.
Investment advice
The company is a high-tech enterprise engaged in the R & D, manufacturing, testing and sales of millimeter wave active phased array micro system, providing special and general millimeter wave active phased array products. Our specific views are as follows:
\u3000\u30001. In a shares, the number of listed companies whose business mainly focuses on the supporting of precision guided weapons and equipment is not large, and the company is one of them. Some models of the company's products have entered the stage of mass production, with sufficient orders on hand and strong certainty of maintaining rapid growth in revenue;
\u3000\u30002. The company's precision guidance products are the only supplier among many downstream models, highlighting the company's deep technical accumulation;
\u3000\u30003. We believe that the high-speed growth of 2q1 may have a certain impact on the company's performance in 2021, although it may have a limited impact on the company's performance in 2022;
\u3000\u30004. The decline of the company's gross profit margin in 2021 is expected to be gradually improved under the promotion of the company's production expansion project and the appearance of scale effect;
\u3000\u30005. The company's strategic placement of senior executives and core employees during the IPO is expected to deepen the binding between the interests of senior executives and core employees and the interests of the company, which will help stimulate the company's innovation vitality and promote the realization of the company's medium and long-term strategic objectives.
Based on the above point of view, we estimate that the company's operating revenue from 2022 to 2024 will be 1.095 billion yuan, 1.559 billion yuan and 2.101 billion yuan respectively, the net profit attributable to the parent company will be 269 million yuan, 386 million yuan and 558 million yuan respectively, and the EPS will be 278 yuan, 3.99 yuan and 5.76 yuan respectively. We give a buy rating, and the target price is 167.41 yuan, corresponding to 60 times, 42 times and 29 times of PE from 2022 to 2024 respectively.
Risk warning: the technical transformation and capacity expansion project of the company's production base is not advancing as expected; There is uncertainty about the epidemic situation, which affects the delivery of the company's products.
