The company issued the report on issuance of shares, purchase of assets and related transactions (draft), which intends to issue a total of 2.086 billion shares to purchase the 100% stake in Chengfei held by the Aviation Industry Group.

Issue of shares to purchase assets draft issued. According to the company's "pre-plan for issuing shares, purchasing assets and related party transactions", the company intends to issue a total of 2.086 billion of the company's shares (accounting for 77.93% of the total share capital after the issue, the total share capital after the issue will reach 2.677 billion shares) to purchase the 100% stake in Chengfei held by the Aviation Industry Group, and the issue price of the shares will be adjusted to 8.36 yuan per share excluding interest. The 100% equity of Chengfei of aviation industry is valued at 24.027 billion yuan, of which 6.585 billion yuan of state-owned exclusive capital reserve is not included in the price scope of this transaction, and after deducting the reserve of state-owned exclusive capital, the price of this transaction is 17.443 billion yuan. The consolidated financial statements of aviation industry Chengfei include six subsidiaries of aviation industry Guifei, Guifei Design Institute, Aviation Industry Changfei, Chengfei Civil aircraft, Chengfei Aviation products and Chengfei Conference. After the completion of this transaction, the aviation industry Chengfei became a wholly-owned subsidiary of the company. The company will add new aviation equipment and department accessories development and production business and focus on the main aviation industry.

The three-year performance commitment period ensures the company's future performance growth trend. According to the Asset Evaluation report disclosed in the announcement and the corresponding evaluation instructions, the performance commitment assets make performance commitments of net profit and income respectively during the performance commitment period. For performance commitment asset 1 (Chengfei aviation), if this transaction is completed in 2023, the net profit corresponding to the performance commitment period from 2023 to 2025 will not be less than 16.0961 million yuan / 16.3012 million yuan / 16.9878 million yuan respectively; if this transaction is completed in 2024, the net profit corresponding to the performance commitment period 2024-2026 will be no less than 16.3012 million yuan / 1698.78 million yuan / 1712.92 yuan respectively. For performance commitment assets 2, if the transaction is completed in 2023, the income corresponding to the performance commitment period from 2023 to 2025 is not less than 65.153 billion yuan / 66.086 billion yuan / 69.97 billion yuan respectively; if the transaction is completed in 2024, the income corresponding to the performance commitment period from 2024 to 2026 is not less than 66.086 billion yuan / 699.70 billion yuan / 749.42 billion yuan respectively.

The profitability has room for improvement, and the high level of contract liabilities ensures the improvement of performance. According to the draft, the income of the aviation industry Chengfei in January from 21 to 23 was 53.39 billion yuan, 67.291 billion yuan and 3.787 billion yuan, respectively, and the net profit was 1.85 billion yuan, 1.313 billion yuan and 156 million yuan, respectively. In terms of profitability, the monthly gross profit margins from 21 to 23 were 8.30%, 7.41% and 8.92%, respectively, and the net interest rates were 3.47%, 1.95% and 4.12%, respectively. In view of the continuous losses of the wholly-owned subsidiary aviation industry Guifei in recent years, excluding the expensive flight of the aviation industry, the income of Chengfei in the period from 21 to 23 years is 51.497 billion yuan, 65.356 billion yuan and 3.779 billion yuan respectively, and the net profit of returning to the mother is 2.299 billion yuan, 2.015 billion yuan and 231 million yuan respectively. In terms of profitability, excluding the aviation industry, the net profit rates of the aviation industry from January 21 to January 23 are 4.46%, 3.08% and 6.11%, respectively. Compared with the restructuring of AVIC Shenyang aircraft, the net interest rate has gradually increased from 3.62% in 2017 to 6.95% in the first quarter of 2023. It is expected that the profitability of Chengfei in the future aviation industry will have room to rise after injection. In terms of balance sheet, as of January 31, 2023, the debt balance of the aviation industry Chengfei contract is 65.428 billion yuan, which is relatively sufficient, which is expected to ensure the continuous improvement of the company's future performance.

Profit forecast: the company's return net profit from 2023 to 2025 is 227 million, 280 million and 345 million respectively, and the corresponding PE valuation is 126,102,83 times; according to the income method evaluation results disclosed in the announcement, the company's return net profit from 2023 to 2025 is forecast to be 2.682 billion yuan, 2.774 billion yuan and 2.511 billion yuan respectively, corresponding to the PE valuation of 48 times, 47 times and 51 times respectively, maintaining a "highly recommended" rating!

Risk hint: major asset restructuring is not as expected, and the progress of reform is lower than expected.