Event: the company released its annual report 2021 and quarterly report 2022 on April 19. In 2021, the company realized operating income of 614 million yuan, an increase of 102.12% over the same period last year, a net profit of 255 million yuan, an increase of 86.47% over the same period last year, and a net profit of 249 million yuan, an increase of 87.70% over the same period last year. 2022Q1 achieved an operating income of 177 million yuan, an increase of 63.10% over the same period last year, a net profit of 66 million yuan, an increase of 40.95%, and a non-return net profit of 63 million yuan, an increase of 37.14% over the same period last year.

The performance continues to grow at a high level, and the layout of the whole process is accelerated. On the revenue side, the company achieved operating income of 614 million yuan in 2021, an increase of 102.12% over the same period last year. In the first quarter of 2022, operating income was 177 million yuan, an increase of 63.10%. On the profit side, the company realized a net profit of 255 million yuan in 2021, an increase of 86.47% in the first quarter of 2022, an increase of 40.95%. The company's main business covers the whole process of aviation parts and CNC precision machining. In 2021, Xindufen / subsidiary CNC business was put into operation, and the new production capacity was gradually released; in terms of special technology, the company's special process production line has established a sound and stable management and control system in 2021, and the capacity utilization rate has increased steadily; in terms of assembly, the company successfully completed the overall delivery of the fuselage section of a certain type of UAV in 2021. With the gradual expansion of the multi-process business of the industrial chain, the advantages of the whole process of overlaying the demand for related products are gradually reflected, and the performance is expected to continue to grow.

The ability of cost management and control has been continuously improved, and the investment in R & D has been continuously increased. The company's expense rate during 2021 was 6.19%, a decrease of 5.00pct over the same period last year, of which sales expenses were 1 million yuan, an increase of 47.53% over the same period last year, mainly due to the increase in transportation costs; the financial expenses were-1 million yuan, a decrease of 279.72% over the same period last year, mainly due to the increase in interest income from bank deposits The R & D cost was 17 million yuan, an increase of 53.99% over the same period last year, mainly due to the increase in investment in technology R & D testing and testing, while the management cost was 21 million yuan, a decrease of 4.22% over the same period last year. The expense rate during the first quarter of 2022 was 2.82%, a decrease in 3.36pct compared with the same period last year. The company's cost management and control capabilities continue to improve, while continuing to increase R & D investment, effectively enhance the company's core competitiveness, and lay a good foundation for the company's long-term development.

The cash flow changes from negative to positive, and the operating situation is expected to improve significantly. In 2021, the net cash flow of the company's operating activities was 246 million yuan, compared with-24 million yuan in the same period last year, and the cash flow changed from negative to positive, indicating a substantial improvement in the company's operating condition; the net cash flow of investment activities was-289 million yuan, a decrease of 495.44% over the same period last year, mainly due to the reduction in financial management due to purchases due to maturity; the net cash flow of fund-raising activities was 457 million yuan, an increase of 3141.73% over the same period last year, mainly due to private placement. In 2021, the company's accounts receivable was 436 million yuan, an increase of 48.82% over the same period last year, bills receivable was 16 million yuan, an increase of 64.36% over the same period last year, and monetary funds were 563 million yuan, an increase of 276.06% over the same period last year. Downstream demand continued to increase, and the company's cash position continued to improve.

With the expansion of production and layout of intelligent manufacturing, the core competitiveness is expected to be further improved. In August 2021, the company raised 500 million yuan to build an intelligent manufacturing center for aviation parts and replenish liquidity. After the completion of the project, the company's theoretical production capacity will increase by 109.05% compared with 2020, and the annual income is expected to increase by 234 million yuan after reaching production. Net profit will increase by 60 million yuan.

On the one hand, after the fund-raising project reaches production, the company's capacity bottleneck is expected to break through, and the carrying capacity of domestic subcontracting and international subcontracting business is expected to be greatly improved. On the other hand, the fund-raising project will use intelligent means to improve product quality, improve manufacturing efficiency, reduce product costs and resource consumption, and effectively avoid product manufacturing risks, and the company's core competitiveness is expected to be further improved. it is expected to realize the transformation from international subcontracting to direct suppliers.

Investment suggestion: due to the higher-than-expected delivery schedule of the company's partial assembly business, we have raised our revenue in 2022-23 to 895 million yuan and 1.197 billion yuan (the previous value is 755 million yuan and 1.019 billion yuan), and increased the income in 2024 to 1.488 billion yuan. The net profit of returning home is 375 million yuan, 519 million yuan and 651 million yuan respectively, and the EPS is 1.54,2.13 yuan and 2.66 yuan respectively. The corresponding PE is 31.24X, 22.59X and 18.02X, respectively. The company has been focused on aviation manufacturing for 18 years, and has significant advantages in the whole process of aviation parts. It will fully benefit from the volume of military aircraft and mass production of domestic civil aircraft, and maintain the "buy" rating.

Risk tips: military orders are not as expected; product delivery is not as expected; profit forecasts are not as expected.