The gross profit margin was close to 50%, and the share of high gross profit products increased

The full name of 712 is Tianjin 712 communication and Broadcasting Co., Ltd., formerly known as Hunan Electric Appliance Factory established in 1936. In 2004, Tongguang group, Zhonghuan group, Tongguang group labor union and Tianjin Trust jointly funded the establishment of 712 Co., Ltd. after being restructured into a joint-stock company in 2016, it was listed on February 26, 2018.

The company has a long history. According to the company,The first TV set in New China was born in the company, known as "the first screen in China" by Premier Zhou. The company took the lead in successfully developing the first generation of ultrashort wave communication radio, the first generation of aviation anti-interference radio, the first generation of railway train dispatching radio, the first generation of maritime automatic identification system, etc. At present, the actual controller of 712 is Tianjin SASAC.

The company's main business is Civil wireless communication, include both terminals and system products.

Wireless private network communication refers toFor a specific department or groupProvide security services to the public (e.g. government affairs, public security and other industries)A professional network of fully reliable wireless services, Its basic network is generally independent of the public cellular mobile communication network.

Taken apart, 712's wireless communication services include handheld, backpack, vehicle mounted, airborne, shipborne and other wireless communication terminal series; Civil wireless communication services are mainly railway wireless communication and urban rail transit wireless communication terminals, which are applied to high-speed railway trains such as "Fuxing" and "harmony" and new heavy-duty locomotives.

712 grew rapidly. In 2020, the company achieved a revenue of RMB 2.696 billion, a year-on-year increase of 25.95%; The net profit attributable to the parent company was 523 million yuan, a year-on-year increase of 51.48%.From 2016 to 2020, the annual compound growth rate of the company's revenue reached 18.01%, and the annual compound growth rate of net profit attributable to the parent company reached 34.67%

The growth rate of net profit exceeded that of revenue mainly becauseHigh margin system products increased.In 2020, the business revenue of 712 system products will reach RMB 1.089 billion, accounting for 40.38% of the total revenue, an increase of 11.54 percentage points compared with 28.84% in 2019. There is a faint momentum of occupying half of the country, and the growth rate is very fierce.

From 2020, the gross profit margin of system product business will reach 51.34%, higher than 48.12% of end products. 712. In 2020, the overall gross profit margin reached 48.12%, a year-on-year increase of 1.53 percentage points, the period expense rate was 7.34%, a year-on-year decrease of 1.84 percentage points, and finally achieved a net profit margin of 19.4%, an increase of 3.27 percentage points. During the reporting period, the weighted roe reached 18.9%, an increase of 4.53 percentage points.

Data source:Wind； Research value and reasonable arrangement

From the situation in recent years, except 2018, the net profit margin, gross profit margin and roe are basically upward.

in addition to, 712 contract liabilities (advances received) continued to increase, from 240 million yuan in 2015 to 1.163 billion yuan in 2020,In 2020 alone, it increased by 71%, mainly because the company's product demand continued to rise, orders continued to increase, and the performance can be released. With the increase of contract liabilities and the simple calculation of current revenue, the contract amount of the company in 2020 may reach 3.2 billion yuan.

The company's cash flow performance is also very good. In 2020, the net cash flow from operating activities was 804 million yuan, an increase of 583 million yuan over 2019, an increase of 2.64 times.

The wireless communication market is broad

When it comes to industry, it is naturally inseparableThe background of increasing defense expenditure is the basis of the growth path of many enterprises.

From 2016 to 2020, the growth rate of China's national defense budget was 7.6%, 7.0%, 8.1%, 7.5% and 6.60% respectively, but the proportion of expenditure still lags behind that of developed countries. According to the data of the third party Stockholm International Peace Research Institute,In recent years, China's spending has accounted for 1.9% of its total GDP。 In contrast, in other countries, such as the United States, Russia, South Korea and India, China's spending accounts for only 1.9% of GDP.

 

Therefore, the increase of China's defense budget is the general trend.2021In the central general public budget expenditure arrangement,[敏感词] expenditure was 1.36 trillion yuan, an increase of 6.8% over the budget implementation of the previous year,We will continue to maintain moderate and stable growth.

In national defense expenditure, the proportion of equipment expenditure in national defense expenditure is gradually increasing.According to the white paper data of China's national defense in the new era, China's equipment expenditure increased from 177.359 billion yuan in 2010 to 428.835 billion yuan in 2017, and the CAGR from 2010 to 2017 was about 13.44%, higher than the overall growth rate.

 

This also brings a good opportunity for the development of wireless communication.Sun Tzu's art of war says that he knows himself and the enemy and is invincible in a hundred battles. As we all know, modern warfare is information warfare, which destroys when it is discovered and decisive when it is launched, communication plays a vital role in national defense.

After entering the 21st century, our wireless communication has basically realized the transformation of communication technology system from analog to digital, communication terminal from single function to multi-function, communication network routing single service to comprehensive service, communication management from artificial to intelligent, narrowband to broadband, and broadband mobile communication technology has been widely used.

However, at present, there are also some shortcomings. For example, at the strategic level, the communication systems of various services and services in China are incompatible with each other, and the degree of interconnection between various systems is not high; At the tactical level, there are some problems in the Chinese information system, such as the lack of connectivity of communication equipment of different systems.

The informatization of the U.S. should be significantly more advanced. Its strategic communication network consists of command center, strategic communication system and communication private network (global information grid). Finally, the U.S. should use the global information grid to connect all U.S. services and arms, battlefield areas, campaign platforms and command posts, so as to achieve rapid exchange of information.

High and new technologies with information technology as the core are changing with each passing day,The evolution of war form to information war has accelerated, and intelligent war has begun to take shape. The trend of long-range precision, intelligence, stealth and unmanned weapons and equipment is more obvious. For the volume, weight, power consumption, capacity, rate, delay, bandwidth, communication distance, coordination ability, anti-interference, anti interception, reconfiguration Integration and other war technical indicators pose great challenges. A large number of communication equipment need to be upgraded or newly developed to meet the needs of new combat methods, which has brought huge market space for communication.

And July 1Second, it is the core supplier and main manufacturer of our army's wireless communication equipment, and it is one of the few enterprises in the industry that can achieve full service coverage.

The company started with ultrashort wave and has strong strength in the field of airborne,The products cover fighter, bomber, transport aircraft, helicopter, UAV, trainer and other platforms. With years of profound technical accumulation and high R & D investment, the company has expanded the data link in the field of airborne ultrashort wave and has always maintained the domestic leading level in terms of anti-interference, confidentiality and networking.

In addition to flying in the sky, running on the ground and swimming in the sea, 712 products and systems can be used. The downstream products include land, sea, air, rocket army, strategic support force and armed police force, which are distributed in the fifth World War area and more than 500 division and regiment level units. It is the main supplier of ultrashort wave wireless communication equipment of our army.

For a long time, the construction of communication systems of various services in China has been relatively independent. Some forces once had the problem of "poor connection and poor connection" in joint training. Under the background of modern joint operations, inter service communication has become an important bottleneck for the exertion of our army's combat effectiveness.Under the general trend of "service compatibility", the company's products across multiple services are expected to benefit.

Due to the special field, few can compete with July 12. The  private network communication industry has certain requirements for industry qualification and product technology,High qualification and technical barriers have been formed for new entrants, and the degree of market competition is low.

In the field of airborne, 712he and CETC 10 are the industry leaders; In the field of ground ultrashort wave wireless communication, other market participants are mainly Hagrid communication, beacon electronics, Zhongyuan electronics, etc. the company and Hagrid communication are market leaders, accounting for about 25-30% of the market space respectively.

Civil: stock increment

In addition to the field, 712 products are also widely used in the field of railway and urban rail transit.

In recent years, China's railway construction has ushered in a peak, among which the high-speed railway is growing rapidly. The accumulated railway mileage put into operation in China has reached 140000 km; Among them, the mileage of high-speed railway has reached 35000 kilometers, ranking first in the world.

According to the plan, the railway network will reach 150000 km in 2020, including 30000 km of high-speed railway; By 2025, it will reach 175000 km, including 38000 km of high-speed rail; By 2035, the goal is to achieve a total mileage of 200000 km and a high-speed rail mileage of 45000 km.

In the field of urban rail transit, more and more cities have planned and approved urban rail projects in recent years. For example, the construction plan of Intercity Railway in Dawan District of Guangdong, Hong Kong and Macao approved in August 2020 involves a mileage of more than 4700 kilometers and a predicted investment of more than 474.1 billion yuan.

This brings two opportunities: stock renewal and incremental procurement.

In terms of renewal, railway and urban rail communication technology is currently in the period of technology upgrading. According to the plan, China's railway wireless communication system will be upgraded to 5g technology, which is expected to be put into application during the 14th Five Year Plan period. TETRA digital trunking system is mainly used for urban rail communication, and LTE market is emerging.

Although it is a civil market, there are high technical barriers and specific industry management policies in the railway wireless communication industry, which also belongs to the pattern of oligopoly.

The 712 railway wireless communication terminal mainly consists of wireless train dispatching equipment, locomotive integrated wireless communication equipment, train protection alarm and approach early warning equipment, which is used to command train operation, transmit train data information, train operation safety protection and voice data service. By the end of 2018,712 mainly occupies about 30% market share in the segment of railway wireless communication terminal.The company's CIR locomotive integrated wireless communication equipment and railway digital frequency modulation system are widely used in Beijing Tianjin Intercity, Beijing Shanghai, Beijing Guangzhou and other high-speed trains, and the high-profile Fuxing is also used in the company's products.

There are many manufacturers in the urban rail wireless communication industry, and the competition is fierce. 712 and China Communications account for about 30% - 40% of the market space respectively; Hytera undertakes 20% - 30% of rail transit wireless communication system projects in China.

in general,At present, the company's civil products account for a low proportion of revenue and profit,In 2020, under the influence of the epidemic, the income declined, but the company will adjust the strategic positioning of civil products in the future,It is expected to build the company's second growth curve.

Greater R & D efforts

The formation of the company's industry position is related to the high R & D intensity.

712 R & D expenses have maintained an upward trend in recent 5 years, the R & D cost in 2020 is 578 million yuan, second only to Hagrid communications among comparable companies; The R & D expense rate of the company has been relatively stable in recent 5 years, maintained at more than 21%, second only to Shanghai Hanxun.

The company said that most of the core technologies of professional wireless communication products are self-developed, have independent intellectual property rights, have exclusive technologies in some markets with access barriers, and always maintain the domestic leading level in anti-interference, confidentiality and networking.In terms of technical reserves, the companyIt has accumulated advanced theoretical and practical foundation in the field of product R & D and production process research,Deeply participate in the formulation of some communication systems and industry standards, and have mastered the corresponding core and key technologies.

712 in recent years, the increase in the proportion of high gross profit system products also depends on the successful development of airborne CNI system, marking the company's leap from single product R & D to system integration R & D.It is expected that with the gradual industrialization of R & D achievements, the company's revenue performance is expected to maintain long-term steady growth.

Of course, considering that the R & D cost ratio is indeed quite high, if the demand for downstream products is weak and the technology cannot be converted into income, it will have an adverse impact.

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