NEO(SH:600184) Minsheng Securities·2024-08-23 15:30Investment Rating - The report gives a "Buy" rating for the company, Guangdian Co., Ltd. (600184.SH), primarily due to its affiliation with the China Ordnance Industry Group and its proactive expansion in response to industry recovery opportunities [1][2]. Core Insights - Guangdian Co., Ltd. is a key player in the optical equipment system sector, focusing on defense and optical materials, with a significant portion of its revenue derived from defense-related products [1][2]. - The company is actively pursuing a capital increase of up to 1.2 billion yuan to fund projects related to precision guidance and high-performance optical materials, positioning itself to capitalize on the growth of information technology in defense [1][2]. - The defense business has consistently contributed over 70% of the company's revenue, with a notable increase in gross margin from 10.6% in 2016 to 17.0% in 2023, indicating improved profitability [1][2][21]. - The optical materials segment accounts for 20% to 30% of revenue, benefiting from the rapid expansion of the optical glass industry in China, which has become the largest producer of ordinary optical glass globally [1][2]. Financial Forecast and Metrics - The company’s revenue grew from 2.21 billion yuan in 2016 to 3.31 billion yuan in 2021, although it faced a decline in 2022 and 2023 due to changes in product sales and structure [21][19]. - The projected net profits for 2024, 2025, and 2026 are estimated at 53 million yuan, 73 million yuan, and 99 million yuan, respectively, with corresponding price-to-earnings ratios of 78x, 56x, and 42x [2][3]. - The company has maintained a stable gross margin, with fluctuations between 10.7% and 16.7% from 2016 to 2023, reflecting effective cost management and product mix adjustments [23][21]. Business Segments - The defense product segment includes large systems, precision-guided munitions, and optical information equipment, which are critical for modern warfare and have seen increased demand due to the shift towards informationized and intelligent combat [1][2][27]. - The optical materials and components segment has developed over 200 product varieties, including high-performance optical glass, which has successfully broken foreign monopolies and achieved advanced domestic and international standards [1][2][10]. Market Opportunities - The ongoing modernization of military equipment emphasizes the importance of electronic information systems, with Guangdian Co., Ltd. positioned to benefit from the growing demand for precision-guided and optical information systems [27][28]. - The global market for missiles and smart munitions is projected to reach $193 billion from 2018 to 2027, indicating a robust growth opportunity for companies in this sector, including Guangdian Co., Ltd. [33][34].