North Industries (SZ:000519) Guotou Securities·2025-09-01 07:06Investment Rating - The report assigns a "Buy-A" investment rating to the company with a 12-month target price of 27.17 yuan, indicating a potential upside from the current price of 21.78 yuan [5][8]. Core Views - The company has shown strong revenue growth driven by its special equipment segment, with a significant increase in revenue and a rebound in profitability in Q2 2025 [2][3]. - The company is expected to turn profitable in 2025, with projected net profits of 2.50 billion yuan, followed by substantial growth in the subsequent years [5]. - The company maintains a high level of research and development investment, which is crucial for sustaining its leading position in the ammunition sector [4]. Financial Performance Summary - In H1 2025, the company achieved revenue of 21.93 billion yuan, a year-on-year increase of 17.36%, but reported a net loss of 0.41 billion yuan [1]. - Q2 2025 revenue surged by 60.1% to 15.74 billion yuan, with net profit rising by 51.5% to 0.88 billion yuan [2]. - The special equipment segment saw an impressive revenue increase of 85.92% to 11.81 billion yuan in H1 2025, with notable growth from subsidiaries North Red Sun and Jiangji Special [3]. Research and Development - The company invested 2.11 billion yuan in R&D in H1 2025, reflecting a year-on-year increase of 14.15%, with an R&D expense ratio of 9.63% [4]. Valuation and Comparables - The report compares the company with peers such as Guoke Military Industry and North Navigation, projecting an average price-to-book (PB) ratio of 6.9 and 6.3 for 2025 and 2026, respectively [5]. - The company is valued at a PB of 3.5 for 2026, considering its unique position within the military equipment sector and the long-term growth potential of its superhard materials business [5].