Event

On October 24, the excellent Aviation Division released its third-quarter report of 2023. In the first three quarters of 2023, the company achieved revenue of 178 million yuan, an increase of 66.8% over the same period last year, and its net profit was 34.62 million yuan, down 28.8% from the same period last year.

Comment

1. The revenue is growing steadily, and the profit level is under short-term pressure. In the first three quarters of 2023, the company's business continued to expand, with revenue of 178 million yuan, an increase of 66.8% over the same period last year, and net profit of 34.62 million yuan, down 28.8% from the same period last year. This is mainly due to the increase in R & D investment, the provision of equity incentive fees, the decrease of government subsidies compared with the same period last year, and the increase in fees for new holding subsidiaries.

2023Q1-Q3, the company achieved an overall gross profit margin of 37.28%, a year-on-year decline of 17.52pcts, mainly due to changes in product structure and fluctuations in the prices of major raw materials. During the period, the expense rate was 19.29%, an increase of 0.52pcts over the same period last year, of which the rates of sales, management and R & D expenses were 3.90%, 11.87% and 10.47% respectively, with an increase of 1.84pcts, 0.04pcts and 1.21pcts over the same period last year. The financial expense rate was-6.95%, a decrease of 2.58pcts over the same period last year, mainly due to the substantial increase in interest income.

2. The military business has grown steadily, and fund-raising projects have opened up room for growth. In the first three quarters of 2023, the company deeply participated in the research and development of the fatigue crack repair of the landing gear girder of a certain domestic fighter, and successfully developed a new base-level overhaul factory to become a customer of the company, and the related new customized production line was completed. As of June 2023, the investment progress of the company's fund-raising project "material increase Manufacturing Base Project" was 61.65%. The company adjusted the time for the project to reach its intended state of use to May 2024, mainly because the project started since 2021. Due to the late time of raising funds and policy control travel restrictions and other factors, the progress of project construction has been affected to a certain extent. The investment progress of "Cold spraying process Development Project of Titanium Alloy Powder" is 37.23%, and that of "Construction Project of High performance Target R & D Center" is 54.67%. The investment schedule of the "Luoyang material increase Manufacturing Base Project" is 21.06%. At present, the first phase of the Luoyang material increase Manufacturing Base Project of the company has been completed and put into production, mainly for customers such as a unit under AVIC. Business is carried out around the "weapons" and "equipment" directions of aviation.

3. In the construction of the production line of parts and components of the thermal management system of new energy vehicles, the civil products business is accelerated. In the first three quarters of 2023, in the field of new energy vehicles, the company has carried out research and development of various types of products for a new generation of thermal management system parts. Some models have been verified by customers and have entered the stage of small batch trial production. According to customer description, the product will be used in a new generation of new energy vehicle platform, with great demand, which puts forward a higher demand for the company's production capacity. At present, the company's new energy vehicle thermal management system parts production line is under construction, and the first production line is expected to be completed and put into production by the end of this year. The main customers of this business are the production and sales of parts related to new energy vehicles, which can be used for various types of passenger and commercial new energy vehicles.

4. Profit forecast and investment rating: we expect the company's net profit from 2023 to 2025 to be 0.71,1.24 and 162 million yuan, an increase of 19%, 76% and 31% over the same period last year. The current share price is 54, 31 and 23 times PE, with a "buy" rating.

Risk Tips:

Product price reduction pressure; increased competition in the industry; business development is not as expected.