1H23 performance is basically in line with our expectations

The company announced 1H23 results: revenue of 9.1 billion yuan, up 10.3% year on year; net profit of 130 million yuan, corresponding to profit per share of 0.17 yuan, up 4.0% year on year, which is basically in line with our expectations. On a quarterly basis, 2Q23, the company's operating income was 50 billion yuan, up 8.8% year on year, and net profit was about 61 million yuan, up 14% year on year.

Excluding the impact of the financial leasing business, 1H23's main business grew steadily. 1H23 achieved revenue of 9.1 billion yuan, up 10.3% year on year. By business: 1) 1H23's main aviation transportation business increased 13.5% year on year, with steady growth; 2) Subsidiary subsidiary Haizhi Maintenance completed equity adjustments in 1H23 and vigorously developed maintenance business. The general aviation maintenance business surged 91% year on year; 3) Affected by the liquidation and cancellation of Haizhi Leasing, the financial leasing business fell sharply by 99.6% year on year.

Cost rigidity has increased, dragging down the gross margin level of 1H23, but 2Q23 has now improved month-on-month. Affected by the increase in business volume and rising labor costs, the company's overall operating cost increase in the first half of the year was higher than the revenue increase. 1H23's gross margin was 20.0%, down 3.9 percentage points from the previous year. Among them, the gross margin of general aviation transportation was 19.9%, down 4.5 percentage points from the previous year. However, on a quarterly basis, 2Q23 gross margin was 23.9%, a sharp increase of 8.7 percentage points over the previous year, mainly benefiting from better cost control in 2Q23.

Development trends

The new chairman has taken office, and investors are advised to pay close attention to the diversified management and development strategy layout of the subsequent company.

The company announced the election of Mr. Yang Wei as the chairman of the 8th board of directors, and also elected the vice chairman and members of the special committee of the board of directors. In recent years, the company has continued to gain strength in the five major business segments of offshore petroleum, emergency rescue, general aviation maintenance, offshore wind power, and onshore navigation. During the 14th Five-Year Plan period, the company focused on building a second growth curve, and investors were advised to pay close attention to the company's strategic layout and changes after taking office in the new board of directors.

Profit forecasting and valuation

We will maintain net profit of RMB 220 million and RMB 270 million unchanged for 2023 and 2024.

The current stock price corresponds to 28.4 times and 23.4 times the price-earnings ratio in 2023 and 2024.

Considering that the company's current valuation level is above the historical average and maintains a neutral rating, we kept the target price unchanged at 7.9 yuan, corresponding to 28.0 times and 23.1 times the price-earnings ratio in 2023 and 2024, and there is 1.4% downside compared to the current stock price.

risks

Economic growth fell short of expectations; contract amounts for major customers dropped sharply; and navigation safety incidents occurred.