\u3000\u3 Guocheng Mining Co.Ltd(000688) Jinhe Biotechnology Co.Ltd(002688) 002)
Event overview
Recently, the company launched a dual night vision thermal fusion three thermal imaging mobile phone PX1, which is specially designed for outdoor exploration and field workers and adopts 256 self-developed technology × 192 resolution infrared chip, equipped with thermal imaging + low light level night vision dual system, supporting the global 5g frequency band. It is understood that this is China’s first dual night vision thermal fusion thermal imaging mobile phone. Analysis and judgment:
The performance in the first quarter was lower than expected, and the performance in the second quarter and the second half of the year is expected to improve
In the first quarter, the company realized a revenue of 445 million yuan (+ 16.96%) and a net profit attributable to the parent company of 46 million yuan (- 61.73%); The gross profit margin of sales was 47.31%, a decrease of 12.26pct over the same period of last year; The net profit margin of sales was 10.45%, a decrease of 21.21 PCT over the same period of last year; During the period, the expense rate was 36.79%, an increase of 14.05 PCT over the same period of the previous year, of which the R & D expense rate increased by 4.23 PCT, the management expense rate increased by 7.72 PCT, and the sales expense rate increased by 4.42 PCT. The decline of profit margin in the first quarter was due to the change of the company’s product structure on the one hand, and the increase of expenses during the period caused by the company’s increasing R & D investment in new business and new product development, strengthening market development, implementing new accounting estimates and confirming the estimated liabilities of after-sales maintenance expenses. With the improvement of the company’s performance and product delivery in the second half of the year, it is expected to accelerate.
The proportion of overseas business income continues to rise, and the outdoor hunting infrared market has broad space
The company’s export products are mainly night vision products for outdoor hunting. At present, they have been sold to dozens of countries in Europe, America, Asia, Australia, Africa and other regions. The data show that the United States issues more than 35 million hunting licenses, labels, licenses and seals every year, and the number of hunters in Europe has reached 6.86 million in 2021. There is a large market demand for infrared equipment for hunting guns abroad. Benefiting from the greater demand of the overseas market, the company’s overseas business revenue increased from 08 million yuan in 2017 to 744 million yuan in 2021, the growth rate has been higher than the overall growth rate of the company, and the proportion of revenue has also increased significantly from 5.13% to 41.80%. In addition, the profitability of overseas business has gradually increased, and the gross profit margin has increased from 40.36% in 2017 to 52.90% in 2021. It is expected to further improve with the expansion of business scale in the future.
The penetration rate of Chinese individual infrared equipment is low, and there is still much room for improvement against the US military
At present, the foundation of China’s defense infrared market is relatively thin, and the military infrared thermal imager is relatively less equipped. In recent years, the application of infrared thermal imager in the field of defense is in the stage of rapid improvement. The data show that the US military has an average of 1.7 infrared thermal imager products per soldier in the Iraq war, while the Chinese army has about 2 million people. At present, the proportion of individual infrared equipment is far lower than that of the United States. Infrared equipment has great growth potential in the military field. According to the prediction of Beijing Ericsson Consulting Center, the total market capacity of China’s special equipment infrared market is more than 30 billion yuan. According to the company’s prospectus, the company’s military revenue accounts for about 30% and the gross profit margin reaches 80.07%. Although the unit price of military products is gradually reduced, the gross profit margin of military products is always relatively stable thanks to technological progress and scale effect.
The cost of infrared imaging has gradually decreased, and new civilian fields have been continuously expanded, bringing broad market space
With the continuous decline of the cost and price of infrared imaging products, the application of infrared imaging in civil field is gradually increasing. As the civil market is more widely used, its growth rate is much greater than that in the military field. According to the prediction of maxtech international and Beijing Ericsson Consulting Center, the global civil infrared market will reach US $7.465 billion in 2023. The rapid growth of the company’s products in the civil market is also mainly due to the decline of costs and the continuous expansion of new application fields. At present, it has been fully applied in the fields of power system operation and maintenance and safety monitoring, industrial production automation, temperature measurement and monitoring of new energy related systems and production processes, enterprise low-carbon environmental protection and safety monitoring, intelligent animal husbandry and other fields.
The proportion of revenue of the whole machine sector increased rapidly, and the scale advantage led to a significant increase in the gross profit margin of the whole machine
The company’s product pedigree gradually extends from core parts to the downstream, and has covered the whole industrial chain products including infrared chips, detectors, movement modules and infrared machines. Among them, the proportion of complete machine business income increased rapidly, from 7.69% in 2017 to 49.94% in 2021. The whole machine sector is dominated by civil products, and the gross profit margin of civil products is generally lower than that of military products. Although the overall gross profit margin of the company decreases slightly with the increase of the proportion of the whole machine, the compensation in volume of the whole machine sector still has a significant driving effect on the gross profit of the company. In addition, driven by the decline in the cost of self-produced core parts and the scale effect, the gross profit margin of the whole machine has increased significantly from 23.36% in 2017 to 50.47% in 2021, and the profitability has been significantly improved.
Technological advantages build solid barriers, high R & D investment and long-term competitiveness
In 2020, the company was approved as the leading unit to undertake the major national scientific and technological research and development task of “Engineering Research in the field of electronic components”. The subject type is the high-sensitivity technical direction in the field of uncooled infrared scientific research. In addition, in the field of non refrigeration, the company has successfully developed the world’s first pixel spacing 8 μ m. Array scale 1920 × 1080 large area array uncooled infrared detector; In the field of refrigeration, the company has made smooth progress in the production of refrigeration infrared movement, and took the lead in completing the 100% localization transformation of the whole series. As an R & D driven enterprise, the company’s investment in R & D continues to maintain a high level, the R & D expense rate remains at about 20% all year round, and its technical strength is always in the first echelon in China. In 2021, the company had 905 R & D personnel, accounting for 43.78% of the total number of employees. The R & D investment reached 418 million yuan, an increase of 82.95% over the previous year. The company continued to increase R & D investment in new business and new product development, making the company competitive in the long term.
Raise funds and invest in multiple projects to accelerate production expansion, horizontal mergers and acquisitions to expand the microwave field
In the production of infrared detector chips, the 8-inch MEMS wafer production line jointly built by the company and the wafer foundry has been put into mass production, with a production capacity of 1500 wafers per month; The annual production capacity of metal encapsulated and ceramic encapsulated infrared detectors reaches 800000, and the annual production capacity of wafer encapsulated infrared detectors reaches 2.6 million; Optimized wafer level thermal imaging modules, with an annual production capacity of 1.5 million; The annual production capacity of infrared thermal imager reaches Shanghai Pudong Development Bank Co.Ltd(600000) . In 2021, the company successfully acquired 56.25% equity of Wuxi huatest, based on the infrared field and expanding the microwave field horizontally, forming upstream and downstream synergy with the acquired company. In February 2022, the company announced that it planned to issue convertible bonds to raise 1.64 billion yuan for the R & D of infrared thermal imaging machines, infrared thermal imaging terminal products and intelligent photoelectric sensors. With the production scale increasing year by year, the scale advantage is further strengthened, and the product yield is also steadily improved.
Investment advice
Taking into account the slowdown in the pace of customer procurement caused by the epidemic and other reasons, we adjusted the company’s revenue forecast for 20222023 from 2.803/3.932 billion yuan to 2.477/3.271 billion yuan, and EPS from 2.17/3.09 yuan to 1.46/2.03 yuan. Considering the gradual increase in the penetration rate of military infrared equipment, the continuous expansion of overseas hunting market and the continuous development of new civilian infrared fields, we expect to achieve revenue of 2.477/32.71/4.078 billion yuan respectively from 2022 to 2024, The net profit attributable to the parent company is 650 / 905 / 1121 million yuan, EPS is 1.46/2.03/2.52 yuan, corresponding to the closing price of 39.63 yuan / share on May 19, 2022, and PE is 27 / 19 / 16 times respectively, maintaining the “buy” rating.
Risk tips
Order fluctuation risk of core customers; Core brain drain risk; Market development is less than expected risk; Increased market competition and risks.
