Incidents:
On August 28, 2023, the company released its 2023 semi-annual report. In the first half of 2023, the company achieved revenue of 245 million yuan, a year-on-year decrease of 32.92%; realized net profit of 96 million yuan, a year-on-year decrease of 32.31%; performance was under pressure; net profit not attributable to the mother was 92 million yuan, a year-on-year decrease of 32.57%. In the second quarter of '23, revenue was 95 million yuan, a year-on-year decrease of 49.57%, and net profit attributable to the parent was 40 million yuan, a year-on-year decrease of 47.64%.
Orders for the aviation parts business declined and the production line was steadily progressing. In the first half of '23, the company's aviation parts manufacturing business achieved revenue of 245 million yuan, or -32.56% year-on-year. It was mainly affected by the procurement cycle of downstream customers. Orders during the reporting period decreased compared to the same period last year. In terms of gross margin, the aviation parts manufacturing business was 49.84%, or -6.18 pct. As of the end of the reporting period, the company's “Aviation Parts Intelligent Manufacturing Center” project had invested 42.02%, and the estimated completion time of the project was adjusted to December 31, 2024.
Take multiple measures together to actively explore new business in the market
The company has full-process capabilities for CNC precision machining of aviation parts, special process processing and component assembly. The company takes advantage of the full process combination and continues to strengthen market development capacity building based on the successive implementation of fund-raising projects. The first is to continue to strengthen and consolidate customer cooperation with existing OEMs, deepen customer needs, and further expand multi-process and multi-business chains; second, strengthen the various business sectors of drones, civil aircraft, aero engines, and aerospace, gradually expand from a single process business to a combined business; third, expand international and domestic multi-regional customers, actively participate in development projects, and lay out new tracks. In the first half of '23, the company's sales expenses were 1,075,100 yuan, an increase of 119.45% over the previous year.
Profit Forecasts, Valuations, and Ratings
We expect the company's operating income for 2023-25 to be 673/8.75/1,007 billion yuan (the original value for 23-25 was 887/11.65/1,341 million yuan, respectively), the corresponding growth rate is 20.00%/29.95%/15.02%, and the net profit for returning home is 236/3.23/369 million yuan (the original value for 23-25 was 3.60/4.90/563 million yuan, respectively), and the corresponding growth rate is 11.22%/36.71%/14.02% for three years CAGR was 20.13%, EPS was 0.81/1.10/1.26 yuan/share, and corresponding PE was 26/19/17 times, respectively. Since the company is a scarce domestic aviation parts supplier throughout the layout process, with reference to comparable company valuations, we gave the company 22 times PE in 2024, with a target price of 24.26 yuan. The rating was downgraded to “increase in holdings”.
Risk warning: Industry policy adjustments, increased market competition, customer order fluctuations.