Core ideas:
China's leading full-process aviation parts processing and manufacturing enterprises. Since its establishment in 2004, the company has mainly engaged in the precision manufacturing business of defense and civil aircraft, engine parts and aerospace large-scale structural components. It has the full-process manufacturing capability of "NC precision machining-special process processing-component assembly" for aviation parts. Under the leading technological strength, complete industrial layout and stable customer base, the company's revenue and return net profit maintained rapid growth in 2017-21, with CAGR of about 46% and 36% respectively. At present, the company is one of the largest private suppliers of a main engine factory under AVIC, and is one of the suppliers with the largest proportion of its key, important and complex parts.
In recent years, the company has actively seized the opportunity of mainframe factory supply chain reform, extending the industrial chain vertically to departmental assembly, such as completing the assembly of complex central parts of a certain type of UAV and the overall delivery of the fuselage segment last year.
Core investment logic: (1) the position of the industry is outstanding, and the company has the full-process manufacturing capability of "NC precision machining-special process processing-component assembly". It is a strategic partner in the field of machining and heat meter processing in a mainframe factory under AVIC Industry. (2) High-end equipment and civil aviation market contribute to growth, medium-and short-term core benefits from mass production of advanced equipment such as main combat equipment and drones, and is expected to expand to other high-end aviation aircraft and aero-engine markets based on full-process manufacturing capability. at the same time, with the improvement of the epidemic in the future, civil aviation subcontracting and domestic civil aircraft business may become one of its performance growth points. (3) actively comply with the supply chain reform of the mainframe factory and be optimistic about the improvement of the supporting level of the medium-and long-term company. Under the premise of large-scale mass production, the core of mainframe factory supply chain reform is to streamline levels to enhance efficiency, which provides second-and third-tier suppliers with industry opportunities to gain higher influence. the company is expected to benefit first with its leading technological strength, complete industrial layout and stable customer base.
Profit forecast and investment advice: we estimate that the company's EPS in 2022-24 will be 1.47,2.05,2.68 yuan per share respectively. Considering the prosperity of the downstream market demand of the company, combined with the continuous expansion of the company's new business such as special technology and component assembly, and referring to the industry valuation, the company is given a 22-year PE valuation of 45 times, corresponding to a reasonable value of 66.33 yuan per share, maintaining the "overweight" rating.
Risk tips: the development of the epidemic situation is higher than expected; equipment delivery batch production is low expected; policy adjustment risk and so on.