The company issued a performance forecast announcement. It is expected that net profit attributable to the parent company will increase by 50%-70% year-on-year in 2009. At the same time, the company's board of directors also issued an announcement stating that it will continue to promote asset acquisitions in 2010. Comment: The company's 2008 EPS was 0.238 yuan, and the 2009 EPS is estimated at 0.357 yuan to 0.405 yuan based on this. The company's current business is mainly auto parts such as seals, switches, radiators, etc. In 2009, benefiting from the national automobile industry revitalization policy, China's automobile sales increased dramatically, thus driving the auto parts industry. Against this background, the company's profit growth has exceeded market expectations. The company began asset restructuring in early 2009. At a price of 7.98 yuan/share, it plans to issue 38.4 million shares to the majority shareholder Guihang Group to acquire 100% of its shares in Guizhou Fenglei Aviation Ordnance Co., Ltd. (“Fenglei Company”) and Guizhou Tianyi Electric Co., Ltd. (“Tianyi Electric”), and issue 52.79 million shares to Guizhou Geke Aviation Electromechanical Co., Ltd. (“Geke Electromechanical”) to acquire 100% of its shares in China Aviation Industry Standard Parts Manufacturing Co., Ltd. (“China Aviation”). However, the acquisition plan was not approved by the Merger, Acquisition and Reorganization Committee of the Securities Regulatory Commission on December 29, 2009. It is expected that similar to the previous asset acquisition case of Aerospace Technology (000901) (denied at the end of 2008, approved at the end of 2009), the company's current asset acquisition will most likely be approved in the second half of 2010. The company plans to inject assets with strong profitability. 1) China Aviation Standard is the only specialized aviation standard parts manufacturer under the China Aviation Industry Group, which occupies 40% of the domestic aerospace standard parts market. The company's aviation products account for 85% of revenue, mainly aero engines and aircraft accessories (rivets, bolts, nuts and steering gear series, etc.). Currently, China's main military models Flying Leopard, Fierce Dragon, J-10, J-11B, civilian models Xinzhou 60, ARJ21, and mainstream aero engines such as Qinling, Kunlun, and Taihang all use the company's aviation standard parts; non-aviation products mainly include new, special-shaped high-strength fasteners, professional parts, and steering for domestic mini cars and light vehicles Device assembly series Products account for 15% of the company's total sales revenue. In 2008, the net profit was 80.13 million yuan, and the net profit margin was above 18%. 2) The main business of Fenglei Company is the aviation products business dominated by aviation plug-in products, accounting for 97% of the company's total sales revenue. The products are mainly aviation plug-in products, including rocket launcher series products, propeller hook series products, missile launcher series products, and ground detection equipment series products. In 2008, the company achieved a net profit of 20.88 million yuan, and a net profit margin of more than 9%. 3) Tianyi Electric's main business is relays, contactors, and control devices. Among them, aviation products are widely used in China's second and third generation main fighter jets and engine systems, accounting for 37% of the company's revenue. Non-aviation products are mainly automotive appliances, motorcycle appliances, traction appliances, and program-controlled power contactors, etc., accounting for 63% of revenue. Its elevator business, which has poor profitability, has been divested into Gui Air Group's Geke Investment in the acquisition plan. After excluding Tianyi Elevator in 2008, the company's net profit was 6.39 million yuan, and the net profit margin was 3.55%. The total net profit of the three assets in 2008 was 107 million yuan, and the net profit margin was 11.72%, which is higher than the 2008 net profit of Guihang Co., Ltd. of 80.89 million yuan and a net profit margin of 5.5%. Based on the diluted share capital after additional issuance, EPS will increase from 0.24 yuan to 0.46 yuan in 2008 after asset injection. Among the assets to be injected, China Aviation Biao had the best performance growth. The company achieved sales revenue of 270 million yuan in 2007, 440 million yuan in 2008, around 600 million yuan in 2009, estimated to reach 1 billion yuan in 2010, and a compound growth rate of more than 25% in net profit from 2007 to 2010. The company is currently actively expanding the civil aviation market, and its market size is 10 to 20 times that of the military market. There is no doubt that the injection of China Aviation's logo will greatly enhance the growth of Guihang's performance. The company may become a general aviation asset integration platform for AVIC General Aircraft Corporation. China Aviation Industry General Aircraft Company has a registered capital of 10 billion yuan, total assets of 25.2 billion yuan, sales revenue of 15.2 billion yuan in 2008, and more than 60,000 employees. It has more than 40 units, including China Guizhou Aviation Industry Group Co., Ltd., Hanzhong Aviation Industry (Group) Co., Ltd., China Special Aircraft Research Institute, Shijiazhuang Aircraft Industry Co., Ltd., Shaanxi Hongyuan Aviation Forging Co., Ltd., and China Civil Aircraft Development Corporation. General Aircraft Corporation currently has three listed companies: Guihang Co., Ltd., China Aviation Heavy Machinery, and China Airlines Sanxin. Among them, AVIC Heavy Machinery has become a platform for integrating heavy aircraft assets, and AVIC Sanxin focuses on new materials business, and may become an integration platform for mechatronic assets owned by China Aviation General Aircraft Corporation. Therefore, the company is most likely to be positioned as a resource integration platform for “general aircraft+general aviation parts+automobile parts.” Earnings forecasts and investment ratings. Considering that “promoting domestic demand, restructuring, and maintaining growth” will still be one of the main lines of China's economic development in the next few years, and the automobile industry, which is a durable consumer goods, has an important position in raising consumer consumption levels and driving the development of various upstream and downstream related industries, we expect the automobile and auto parts industry to maintain rapid growth from 2010 to 2012. Affected by this, the growth of the company's auto parts business will also continue to maintain a good momentum of development. Among the assets to be injected, the performance growth rate of China Aviation Standard is expected to remain above 20%, while the performance growth rate of Fenglei Company and Tianyi Electric is expected to remain around 10%. If asset injection is not taken into account, the company's EPS for 2009, 2010, and 2011 is expected to be 0.31 yuan, 0.38 yuan, and 0.46 yuan; if the company's asset acquisition can be completed within 2010, based on the total share capital of 380 million shares after issuance, the company's 2010 and 2011 EPS is expected to be 0.78 yuan and 0.94 yuan respectively. The dynamic PE corresponding to the latest stock price is 27.2 times and 22.6 times, respectively. Valuation has a clear advantage among military stocks. At the same time, considering that subsequent asset injection is extremely likely, a “buy” rating was given for the first time, with a target price of 27 yuan.