Events:

According to the company's semi-annual report for 2023, 2023H1 achieved an operating income of 7.507 billion yuan, an increase of 3.91% over the same period last year, and its mother's net profit was 319 million yuan, down 9.14% from the same period last year. Of this total, 2023Q2 realized operating income of 3.893 billion yuan, an increase of 4.29% over the same period last year, an increase of 7.73% over the previous month, and a net profit of 95 million yuan, down 45.68% from the same period last year and 57.74% from the previous year.

Investment Summary:

Revenue is in line with expectations. At present, the company has formed a "twin-engine"-driven development pattern of automotive metal parts lightweight industry and navigable aircraft manufacturing industry. The lightweight business of automotive metal parts focused on aluminum alloy and magnesium alloy lightweight, stuck at the new energy track, the business orders were sufficient, and the overall sales increased compared with the same period last year, but affected by the decline in the prices of aluminum ingots, magnesium ingots and steel, the operating income decreased slightly compared with the same period last year. 2023H1 achieved operating income of 6.227 billion yuan, down 2.14% from the same period last year, of which the operating income of aluminum alloy wheel business was 3.638 billion yuan. 1.86% less than the same period last year The operating income of magnesium alloy business was 2.03 billion yuan, down 3.85% from the same period last year. Navigation aircraft business continued to optimize, high value-added new aircraft delivery and after-sales service business improved steadily, Diamond eDA40 electric aircraft successfully flew, 2023H1 achieved business revenue of 1.28 billion yuan, an increase of 48.62% over the same period last year.

The gross profit margin increased significantly, and the impairment of goodwill was a drag on profits. 2023H1's gross profit margin was 20.89%, up 2.62pct from the same period last year. Among them, the lightweight gross profit margin of cars was 20.4%, up 3.91pct from the same period last year, while the decline in the price of raw materials led to a substantial increase in gross profit margin; and the gross profit margin of navigable aircraft was 23.26%, down 8.14pct from the same period last year. 2023Q2's gross profit margin was 20.41%, a month-on-month drop of 0.99pct. The impairment of Wuxi Xiongwei goodwill, a subsidiary of 2023H1, is 149 million yuan, which has a certain impact on net profit. If the effect of goodwill impairment is excluded, the net profit is up 33.31% compared with the same period last year.

Optimistic about the volume of magnesium alloy business. As a global leader in the deep processing business of lightweight magnesium alloy new materials, the company's main products include powertrain, front carrier, dashboard skeleton, rear hatchback door inner panel, side door inner panel and other automotive parts. With the supply of magnesium in the upstream and the strong demand for lightweight vehicles downstream, the permeability of magnesium alloy products is expected to increase gradually, and the company has obvious first-mover advantages.

Investment advice:

We estimate that the company's operating income from 2023 to 2025 will be 17.12 billion yuan, 18.59 billion yuan and 20.32 billion yuan, an increase of 4.5%, 8.6% and 9.3% over the same period last year, and the net profit of its parent will be 990 million yuan, 1.32 billion yuan and 1.59 billion yuan, an increase of 22.9%, 32.3% and 20.9% over the same period last year, corresponding to 12.4,9.4 and 7.8 times of PE respectively.

Risk Tips:

Car sales fall short of expectations; navigable aircraft sales fall short of expectations; overseas business risks; rising prices of raw materials; exchange rate fluctuations.