Incidents:
On August 29, 2023, the company released its 2023 semi-annual report. In the first half of 2023, the company achieved revenue of 231 million yuan, an increase of 23.92% over the previous year; realized net profit of 04 million yuan, a year-on-year decrease of 293.42%; performance was under pressure; net profit not attributable to the mother deduction was 104 million yuan, a year-on-year decrease of 1449.44%. In the second quarter of '23, we achieved revenue of 131 million yuan, an increase of 4.64% over the previous year, and achieved net profit of 0.4 million yuan, a year-on-year decrease of 129.03%.
The civil aviation service maintenance business grew steadily. In the first half of '23, the company achieved airborne equipment business revenue of 113 million yuan, +50.97%; aviation maintenance business revenue of 71 million yuan, +24.83%; measurement and control equipment development business revenue of 29 million yuan, or -33.05%; technical service and other business revenue of 17 million yuan, +32.81% year on year. In terms of civil aviation business, with the recovery of the civil aviation market, the company's civil aviation maintenance business has achieved year-on-year growth, and further forensics and marketing activities for the aviation kitchen plug-in series have achieved remarkable results; in the defense business, a number of airborne equipment batch production projects have been implemented and gradually delivered. The procurement process for major projects such as airborne training and support equipment is progressing normally, and related business is expected to gradually grow.
Market development efforts have been stepped up across the board, and expenses have increased during the period
The company actively strengthened talent addition and team building; in order to promote the expansion of its main business into new customer areas and the expansion of emerging business to old customers, the company increased its market development efforts across the board, which led to an increase in related labor costs and period expenses during the reporting period. In the first half of '23, sales expenses amounted to 113 million yuan, a year-on-year increase of 27.11%, and management expenses of 65 million yuan, an increase of 13.71% over the previous year. As of the end of the reporting period, the company's contract liabilities were $23 million, an increase of 35.29% over the beginning of the reporting period. According to the cyclical characteristics of the company's industry and the company's annual business plan, delivery of key projects and batch production projects will be concentrated in the second half of the year, and it is expected that the company's profitability will return to normal levels.
Profit Forecasts, Valuations, and Ratings
We expect the company's operating income for 2023-25 to be 632/817/1,003 million yuan, the corresponding growth rate is 53.13%/29.26%/22.82%, respectively, and the net profit for the return mother is 0.48/0.65/82 million yuan, respectively, and the corresponding growth rate is 205.37%/34.27%/26.16%, respectively. EPS is 0.19/0.25/0.32 yuan/share, and corresponding PE is 60/45/36 times, respectively. Considering the increase in the company's civil aviation business and the gradual implementation of defense orders, referring to comparable company valuations, we gave the company 4.00 times PS in 2024, with a target price of 12.80 yuan. Maintain the “increase in holdings” rating.
Risk warning: Downstream orders have fallen short of expectations, and domestic competition for civil aviation maintenance has intensified.