Core viewpoints

The company released its mid-2023 report that 23H1 achieved revenue of 1.981 billion yuan, up 57.53% from the same period last year, and net profit of 298 million yuan, up 30.04% from the same period last year. Thanks to the strong demand in the aviation and aerospace industries, the company has sufficient orders, continuous release of production capacity, and high performance growth, the company's follow-up performance growth trend is expected to continue.

In the near future, the company plans to issue 1.95 billion convertible bonds to expand the production of ring forgings and parts processing in the aerospace field, so as to improve the added value and profitability of its products.

Event

The company released its semi-annual report in 2023, with operating income of 1.981 billion yuan in the first half of the year, up 57.53% over the same period last year; net profit of 298 million yuan, up 30.04%; and non-return net profit of 275 million yuan, up 25.10% from the same period last year.

Brief comment

Benefiting from the strong demand in the aerospace industry, the performance achieved rapid growth in the first half of 2023H1. The company achieved a revenue of 1.981 billion yuan (+ 57.53%), a net profit of 298 million yuan (+ 30.04%) and a non-return net profit of 275 million yuan (+ 25.10%).

In a single quarter, 23Q2 achieved a revenue of 1.038 billion yuan, compared with + 60.55% plus 60.55% with 9.98% with 23Q2 with a net profit of 155 million yuan, and with + 27.09% with 7.96% with with / with 7.96%. With the growing demand of aerospace, new energy and petrochemical industries, the company has sufficient orders, continuous release of production capacity, business expansion, high revenue growth, the company's follow-up performance growth trend is expected to continue.

The company plans to issue convertible bonds to expand the production capacity of aerospace precision ring forgings. The company plans to issue no more than 1.95 billion yuan of convertible bonds in the near future. It is used for aerospace special alloy precision ring forgings intelligent production line construction projects, aerospace parts precision processing construction projects and supplementary liquidity. It is estimated that the annual operating income of the two projects is 2.021 billion yuan and 687.138 million yuan respectively (excluding tax), the total annual profit is 386.3737 million yuan and 23739.73 yuan respectively, and the financial internal rate of return of the project investment is 26.40% and 18.75% respectively (after income tax). The payback period of investment is 6.38 years and 7.58 years (including 3 years of construction). After the completion of the project, the company's production capacity in the field of aerospace precision ring forgings will be further expanded, precision processing capacity is expected to continue to improve, and improve the added value and profitability of its own products.

Continue to expand equipment advantages, market development and internal management under the two-pronged approach, the rapid development of the forging industry is inseparable from the upgrading of forging equipment, only sophisticated equipment can produce high-quality products. Through continuous capital investment and the introduction of foreign advanced production equipment, the company has the production capacity of large, special-shaped, high-end and large-scale industrial metal forgings. At present, it has 1250T, 2000T, 3150T, 3600T, 7000T fast forging machines and 0.6m, 1.2m, 2.5m, 5m, 8m and 10m precision CNC ring rolling machines. at the same time, it has heating furnace, heat treatment furnace, and physical and chemical testing equipment in line with industry standards, and the equipment of various departments is constantly increasing and updating. Under these conditions, it can meet the processing and production of common carbon steel, alloy steel, stainless steel, superalloy, titanium alloy, aluminum alloy and magnesium alloy. The company has the ability to produce ring forgings and special-shaped forgings with a diameter of 200-10000mm and a height of 30-1600mm. The company has achieved full coverage of the manufacturing capacity and size of ring forgings and casing forgings for domestic and international aero-engines. In particular, with the construction of this fund-raising project, the German West Mark 10m ring rolling machine will be put into production, which will further enhance the company's equipment capacity and reach the domestic leading level.

In terms of market development, in the face of the complex international situation and market environment, the company not only keeps the continuous follow-up of customers in the existing industry, but also increases the development of new markets and customers, so as to provide customers with higher quality and more professional services. In terms of aerospace business, the company has strengthened its ties with various main engine factories, participated in the development and trial production of a number of new models, the die forging business has also completed the development of new customers and part of the trial production, the cooperation with Luo Luo and GE has been continuously deepened, and some of the trial products have received mass production orders. In terms of energy business, the company firmly implements the national "double carbon" development strategy, undertakes national key scientific research projects, helps break through technical bottlenecks, and the wind power business grows rapidly in the first half of the year.

In the aspect of internal management, the main mode of the company is to fix production by sales and organize production around the market order of the marketing center. The company divides the product types from industry, material and size, and puts forward the corresponding management requirements, which ultimately improves the production efficiency and quality reliability of the products. In the first half of the year, the company completed the overall relocation and expansion of the testing center, which not only improved the testing capacity, but also reduced outsourcing costs to meet the company's requirements of reducing costs and increasing efficiency; while doing a good job in product research and development and technological innovation, strengthen talent inventory and talent echelon construction, establish a sound talent evaluation system and talent promotion channels, increase on-the-job skills training and related business ability training, and increase per capita output value. 3T (TPM, TQM, TPS) Lean system is gradually built to provide strong support for the company to reduce costs and increase efficiency; in order to improve production efficiency and control production costs, the company maintains a reasonable quantity of spot inventory according to market changes in order to respond quickly to customer demand.

Profit forecast and investment advice: aerospace supporting continued high growth, optimistic about medium-and long-term performance growth, maintain the buy rating company is a national high-tech enterprise, is one of the few domestic private enterprises that can provide special alloy precision ring forgings for aero-engines, aerospace launch vehicle rockets and missiles, satellites, gas turbines and other high-end equipment At the same time, the company has entered the supply chain system of China Aviation Development, Aerospace Science and Technology and other large domestic aerospace groups, and is optimistic that the company will continue to improve its business scale. It is estimated that the company's net profit from 2023 to 2025 is 673 million yuan, 835 million yuan and 1.002 billion yuan respectively, an increase of 38.53%, 24.18% and 19.94% respectively over the same period last year. The corresponding EPS from 2022 to 2025 is 5.55 yuan, 6.89 yuan and 8.27 yuan respectively, and the corresponding share price PE is 19 times, 15 times and 12 times respectively, maintaining the "buy" rating.