AVIC Optoelectronics (002179): Stable military products + elasticity of civilian products to promote profit forecast upward firm firm optimistic that military scarcity White Horse accelerates growth
Investment Highlights: Event: The company released the first quarter of 2019 report: the company achieved operating income21.
5.6 billion, the previous growth rate was 45.
95%, a year-on-year increase of 3.
86%; realized net profit attributable to mother 2.
3.3 billion, the previous growth rate was 39.
14%, the same period last year range -8.
89%; net profit after deduction of non-return to mother 2.
3 billion, the previous growth rate was 40.
78%, a range of -9 in the same period last year.
40%; the parent company realized operating income of 17.
34 trillion, an annual growth rate of 56.
64%, achieving a net profit of 2.
1.7 billion, an increase of 33 in ten years.
The company’s performance far exceeded market expectations.
Opinion: The company ‘s Q1 performance growth rate exceeded market expectations, and the period effect caused by the scale effect decreased more than the decrease in sales gross profit margin caused by the adjustment of the military and civilian product structure, or the main factor to achieve high overall performance growth.
The company’s Q1 revenue growth rate reached 45.
95%, our analysis believes that the demand release bonus brought by the new round of demand expansion cycle of military products, overlapping 5G, new energy and other downstream downstream demand releases or driving the company’s revenue expansion while at the same time attributed to the mother net profit growth rateAchieve 39.
At 14%, the scale of revenue increased significantly to increase performance; in terms of profitability, Q1 achieved a gross profit margin of 32.
72%, a decrease of 2 over the same period last year.
37 points may be caused by the slower growth rate of high-margin military products than low-margin civilian products, but at the same time, the three rate growth rate is increasing by revenue, and the trend of strengthening the cost management ability supported by scale effects is prominent.Rate 17.
60%, a decrease of 3 over the same period last year.
15pct, the decline is greater than the decline in gross profit margin, and the decline in gross profit margin once again affects the steady growth of performance.
The higher growth of net inflows of operating activities was mainly due to the marked improvement in cash repayment status under the background of rapid income expansion and the significant reduction in cash occupation while the inventory size remained stable.
Company Q1 achieved net operating cash flow of -0.
180,000 yuan, an increase of 93 in ten years.
64%, the cash flow situation has improved significantly.
From the perspective of the net inflow of operating activities, the company achieved a net inflow of operating activities in Q1.
26 ppm, an increase of 16 in ten years.
60%, accounts receivable for the same period was 64.
29 trillion, an increase of 7 from the end of 2018.
18%, which is far lower than the current revenue growth rate, and the cash repayment situation has improved significantly.
In terms of net operating activities, the company achieved a net decrease in operating activities in Q1.
4.4 billion, a decrease of 5 every year.
32%, the company’s inventory at the end of Q1 2019 was 19.
74 million, an increase of 0 from the end of 2018.
46%, the inventory growth rate is slow, and the cash occupation has been greatly reduced.
The tilt of the product structure towards civilian products has led to a short-term decline in the company’s gross profit margin. However, the volume of advantageous new products and autonomously controllable products may optimize the business structure of civilian products, or it may cause the gross profit margin of civilian products to rebound.In Q1 2019, the company’s sales gross profit margin reached 32.
72% compared to the same period last year (35.
09%) fell by 2.
37pct, our analysis believes that the growth rate of civilian products is faster than the change in product structure or the decrease in gross profit margin brought by military products; in the past few years, due to factors such as the decline of new energy vehicle compensation and the 4G investment peak, the gross profit margin of civilian productsDeclining year by year, but from the perspective of the five-year cycle, it is the same as 2014 (the first year of two years after the previous five-year cycle) Q1 (31.
83%) score, the gross profit margin for this period increased by 0.
At 89pct, we believe that the introduction of superior new products in the field of 5G and new energy vehicles will accelerate the localization and replacement under the control of overlapping and self-control.
The company is currently in the period of expenditure, and pressure on short-term expenses is inevitable, but it is expected to improve in the second half of the year; however, high capital expenditures will provide necessary support for the company’s capacity allocation to accurately capture demand release.
The company grasps the subdivision of domestic demand for subdivided areas. 5G and EV are currently in the replacement period.
From the perspective of the three fees, the expansion of the revenue scale has caused a short-term rise in the three fee expenditures; the company’s Q1 expenditures are zero sales expenses.
0.94 million yuan, an increase of 35 in ten years.
19%, the company disclosed that the increase in market investment is the most important factor for the rapid growth of sales expenses; at the same time, R & D expenditures reached 1.
6.2 billion, a 10-year growth of 23.
66%. In 2018, the company ‘s R & D staff increased by 598 employees, which caused a sudden increase in employee compensation or a short-term rapid increase in research and development costs. In the long run, it gradually stabilized; at the same time, it spent 0 financial expenses.
33 ppm, an increase of 26 in ten years.
92%, the starting point of the index amortization of $ 1.3 billion convertible bond projects or the increase in financial costs. The impact of index amortization on financial costs is expected to be gradually eliminated in May 2019, while the convertible bond projects supplement current assets.Monetary funds increased by 100 in ten years.
70%, the interest income brought in first hedged some financial expenses.
From the perspective of construction in progress, Q1 2019 is under construction5.
64 ppm, an increase of 77 in ten years.
92%, mainly due to the increase in the company’s new technology industrial base and the photovoltaic technology industrial base (second phase), and at the same time increased due to prepaid infrastructure projects, equipment, and other non-current assets.
82%, the company’s previous capacity releases precisely matched the industry demand release interruption, and the high amount of capital pushed the company to accurately capture demand.
杭州桑拿 Subsidiaries’ overall performance improved beyond expectations, bid farewell to dragging down overall operating performance and entered a new stage of positive feedback. Operation improvements such as Shenyang Xinghua and AVIC Fujita provided new impetus for the company’s performance growth center to move upward.
The company’s Q1 consolidated statement revenue growth rate in 2019 reached 45.
95%, slower than the growth rate of the parent company (56.
64%), the growth rate of net profit attributable to mothers in the consolidated statement was 39.
14%, faster than the growth rate of the parent company (33.
23%), continued the phenomenon that the consolidated statement end performance growth in 2018 was faster than that of the parent company.
From the perspective of subsidiaries, from 2014 to 2017, AVIC Fujita’s net profit continued to decline, Xiangtong Optoelectronics’ performance growth slowed down, and some subsidiaries dragged down overall performance. In 2018, AVIC Fujita reversed the net profit growth trend and continued to increase 116.
67%, Shenyang Xinghua achieved a net profit of 0.
73 ppm, an increase of 48 in ten years.
At 98%, the performance of subsidiaries was reversed, and positive feedback on overall performance was achieved, which helped the company’s overall performance to grow steadily.
The core military business is a stable and fast-release stabilizer for the company’s performance. Benefiting from the planned dividend of military products entering the accelerated expansion cycle, the order is designed to continue to maintain sufficient growth, and stable growth can be expected.
The current military procurement model is still the command system model under the planned economic system. The military procurement expenditure is in line with the pattern of low before high and high. In 2019, two years after entering the five-year cycle, military orders will enter a new round of expansion cycle, superimposing military reform.The compensatory growth brought about by the gradual elimination of the suppressive factors. As the absolute leader in the domestic military defense industry, the company’s military business may fully benefit from the speeding up of national defense informatization and the full installation of new weapons and equipment to ensure stable growth in performance; 2019年 年Q1公司预付账款实现0。
75 ppm, a 55-year increase.
55%, higher than the growth rate of revenue, showing that there are abundant short-term orders. Considering the company’s business model of sales and production, product delivery, and revenue recognition will continue to promote the transfer of actual operating income from the asset-liability side to the profit side, and then promote performance appreciation.Speed the center up.
One of the elasticities of growth: new energy vehicle connectors, selected domestic and foreign electric vehicle leading OEMs, optimized product structure to improve profitability, and the arrival of key customer orders in the future may further consolidate their leading advantages.
The company has mastered the high-voltage, high-speed, high-reliability new energy connector technology through independent research and development, and has been put into production to form an industrial scale. Domestic customers have covered BYD, Chery and other domestic first-tier new energy vehicle manufacturers, and their products occupy a stable position.It is at the forefront of the country and has obtained the qualifications and orders of well-known overseas overseas car companies to successfully enter the global new energy vehicle industry supply chain; breakthroughs in core customers may lead to optimization of the product structure and achieve a bottom-up rebound in the gross profit margin of new energy vehicle products.; In 2018, the new energy vehicles have grown against the backdrop of the passenger car market entering the stock market. In Q1 2019, new energy production and sales have increased by 88.
6% and 85.
4%, heavy demand for new energy vehicles will drive orders from upstream component suppliers, and the leading position advantage will drive the company to increase performance flexibility.
Second growth elasticity: communication 5G interconnection business, binding Huawei and international giants, adhere to the responsibility of independent controllable and domestic alternatives, from the development, new products to customers to achieve a full line of penetration, to promote the smooth volume of high-end products.
5G continues to have low latency and promote the interconnection of all things at a high speed. The era of digitalization and intelligent empowerment has accelerated the construction of 5G. China follows from 2G, 3G catches up to 4G, and 5G is the new big country game field. Policies accelerate 5G landing and autonomyHistorical possibility of controllable domestic substitution.In 2018, the company has provided overall optical and electrical connection solutions for 5G commercial services of the three major telecommunications operators in South Korea, and has become the only Huawei manufacturer with the title of “Global Gold Supplier” in China.
In 2019, 5G commercial scale deployment started globally. Huawei simultaneously extended more than 40 5G commercial contracts, and more than 70,000 base stations have been delivered to users. The company has become a core supplier of wireless base stations and data center equipment for important communications customers at home and abroad.Promote the large-scale development of overseas markets relying on Huawei and other manufacturers, and realize the tilt of product structure towards high-margin and civilian products. At the same time, the company continues to expand R & D investment, and R & D expenses in Q1 2019 increase.
66%, high capital expenditures focused on accurate future decisions effectively supported the company’s category expansion, and helped the company seize the domestically controlled alternatives under its own control to achieve high-end civilian product volume.
The new changes in the long-term logic were verified by signals in Q1 of 2019, and the key investment logic for revaluing core military assets under the development of the company’s model of military-civilian integration is highlighted again: 1) The company is an absolute leader in the connector of the domestic military defense field.Benefiting from the speed of national defense informationization and the full supply of new weapons and equipment, the scarce supply main body; 2) The company has been cultivating in industrial applications such as new energy vehicles, communications 5G, rail transit, and nuclear power for many years.Under the new opportunities of deterministic growth of EV and high-end equipment construction, combined with the urgency of manufacturing high-end component replacements, the company will fully benefit from industry demand release and independent controllable policy dividends; 3) the company’s high-speed backplane, optical modules, Special connectors, liquid cooling, integrated cabinets and other new products with high gross profit and rapid growth, overseas markets blossom and business development in depth, is expected to continue to help the company ‘s performance growth to buy new levels; 4) the company has a high-quality governance structure,It is believed that the self-interest of employees is closely related to the high-quality development of the company, the background of state-owned enterprises, and the private mechanism和Business outside the company’s outstanding ensure superior quality.
Upgrade earnings forecast and maintain Buy rating.
Taking into account that the Q1 2019 performance exceeded expectations is an important signal verification of the company’s stable growth in military products and the elasticity of profitability of civilian products, complementing the acceleration of the military industry’s prosperity and high certainty, overlapping 5G, EV may enter the heavy volume phase in the second half of the year, so we raise the companyThe predicted net profit for mothers in 19/20/21 is 12.
31 (original value of 11.
59) billion yuan, and the EPS in 19/20/21 was 1 respectively.
82 yuan / share, currently sustainable (2019/04 / 25,40.
17 yuan) corresponding PE is 25/18/14 times.
The company is an outstanding enterprise in the world connector industry and domestic defense technology industry that has both product competitive advantages and improved governance structure. Considering that the company is in the acceleration phase of a new round of military procurement expansion, new models of merged products have been put into production.The product cycle is expected to fully benefit from the dual dividends of military industry and demand release of EV, 5G and autonomous controllable policies.
Therefore, maintain BUY rating.
Risk reminders: 1) Uncertainty of order release rhythm and order confirmation progress in the downstream military and civilian products industry; 2) Risks of new business and overseas business market development; 3) Risk of squeezed profit margins due to fierce industry competition; 4)Risk of decline in profitability of new products leading to decline in profitability