Incidents:
On August 29, 2023, the company released its 2023 semi-annual report. In the first half of 2023, the company achieved revenue of 903 million yuan, an increase of 57.72% over the previous year; achieved net profit of 03 million yuan, a year-on-year decrease of 60.01%. Performance was under pressure; net profit of non-attributable net profit was 0.5 billion yuan, a year-on-year decrease of 391.93%. In the second quarter of '23, we achieved revenue of 481 million yuan, an increase of 54.09% over the previous year, and a net profit of 0.5 billion yuan, a year-on-year decrease of 77.94%.
The civil aviation maintenance business increased significantly. In the first half of 23 years of steady development of the military equipment support business, the company's equipment development and support business achieved revenue of 148 million yuan, -20.51% year-on-year, and aviation maintenance and service business revenue of 752 million yuan, +96.55% year-on-year, mainly due to the saturation of overseas subsidiary MMRO's core business orders and production capacity. In terms of gross margin, the equipment development and security business was 41.61%, -0.08 pct; the aviation maintenance and service business was 16.07%, the year-on-year -6.33 pct. With the steady growth of the civil aviation business, the company's maintenance business is expected to continue to increase. In the first half of '23, credit impairment losses amounted to RMB 25.6832 million, asset impairment losses amounted to RMB 7.242,200, and reduced company profits by a total of 32.9304 million yuan.
Continuously increase R&D investment and actively promote engine health management system development projects. The company has mature technical capabilities in airborne equipment development. At the same time, it has gradually planned and carried out research and development of related products such as helicopter vibration monitoring and health diagnosis systems, engine health management systems, fixed-wing aircraft health monitoring systems, and big data application services. In the first half of '23, the company's R&D investment in the first half of '23 was 33 million yuan, an increase of 17.44% over the previous year. As of the end of the reporting period, the “Engine Health Management Project” has invested 44.69%. Construction is expected to be completed in April '24.
Profit Forecasts, Valuations, and Ratings
We expect the company's operating income in 2023-25 to be 15.74/17.74/1,994 billion yuan, corresponding growth rates of 12.65%/12.72%/12.39%, net profit of 0.50/0.60/071 billion yuan, corresponding growth rates of 84.11%/20.76%/17.72%, three-year CAGR of 37.81%, EPS of 0.21/0.25/0.29 yuan/share, and corresponding PE of 60/50/42 times, respectively. Given the company's advanced technology in the field of aviation maintenance of airborne equipment, according to the relative valuation method, with reference to comparable company valuations, we gave the company 1.90 times PS in 2024, and the company's corresponding target price was 14.05 yuan. Maintain the “increase in holdings” rating.
Risk warning: The military product lineup falls short of expectations, the risk of equipment development being blocked, and competition in the domestic aviation maintenance industry is increasing the risk.