Event: on October 24, the company released its third quarterly report of 2023. In the first three quarters of 2023, the company realized operating income of 3.623 billion yuan, an increase of 7.69% over the same period last year. It realized a net profit of 844 million yuan, an increase of 25.84% over the same period last year. The net profit of non-return was 801 million yuan, an increase of 22.04% over the same period last year. The company's 2023Q3 realized revenue of 1.21 billion yuan, an increase of 13.67% over the same period last year, a net profit of 293 million yuan, an increase of 50.06% over the same period last year, and a net profit of 260 million yuan, an increase of 39.90% over the same period last year.

The main business of new materials grew steadily, and the total revenue / profit fulfilled the annual business plan of 74% and 85%. On the revenue side, the company achieved operating income of 3.623 billion yuan in the first three quarters of 2023, an increase of 7.69% over the same period last year, and the operating income completed 73.94% of the annual business plan. At the profit end, the company achieved a net profit of 844 million yuan, an increase of 25.84% over the same period last year, and the total profit completed 84.52% of the annual business plan. In terms of business, in the first three quarters, 1) the revenue of aviation new materials business reached 3.552 billion yuan, an increase of 6.97% over the same period last year, mainly due to the increase in sales of aviation composite raw materials and brake products; the net profit was 862 million yuan, an increase of 21.49% over the same period last year. It is mainly due to the company's strengthening cost control and management, leading to a year-on-year increase in comprehensive gross profit margin. 2) the revenue of the machine tool equipment business reached 43.4507 million yuan, an increase of 17.50% over the same period last year, mainly due to the year-on-year growth of special equipment and aviation parts processing business; the realization of home net profit of-19.7296 million yuan, a year-on-year loss reduction of 9.8603 million yuan, mainly due to the improvement of comprehensive gross profit contribution from the change of business structure and the reduction of labor costs of redundant personnel. 3) the listed items of Beijing Airlines will increase the investment income by 29.6282 million yuan. In terms of profitability, in the first three quarters of 2023, the company's sales gross profit margin was 37.44%, up 4.46pcts from the same period last year; the net sales profit rate was 23.43%, an increase of 3.54pcts over the same period last year. The company achieved remarkable improvement in quality and efficiency, and steadily improved production efficiency and operation quality.

Good cost control, strengthen R & D innovation. In terms of expenses, the company accounted for 7.13% of the three fees in the first three quarters of 2023, an increase of 0.59pct over the same period last year, including sales expense rate, management expense rate and financial expense rate of 0.60% (year-on-year growth 0.02pct), 7.11% (year-on-year growth 0.55pct) and-0.58% (year-on-year growth 0.03pct). At the R & D level, the company's R & D expenditure in the first three quarters of 2023 was 114 million yuan, up 35.71% from the same period last year, and the R & D / revenue ratio increased by 0.65pct to 3.15% year-on-year. According to the forward-looking indicator, as of 23Q3, the company's accounts payable increased by 897 million yuan, or 110.50%, over the beginning of the year, mainly due to the fact that the current period of subsidiary aviation industry compound materials procurement did not reach the payment account period, indicating that the company is actively preparing production and goods. Under the trend of the demand for advanced military aircraft and the domestic substitution of civil aircraft, the company is expected to continue to benefit from the improvement of internal production and delivery capacity, continuous optimization of product structure and reform and efficiency improvement as the core supplier of domestic aviation composite materials.

Investment suggestion: we maintain the profit forecast. From 2023 to 2025, the company's operating income is expected to be 5.313 billion yuan, 6.862 billion yuan and 8.742 billion yuan, and the net profit is 1.005 billion yuan, 1.278 billion yuan and 1.680 billion yuan respectively. The corresponding EPS is 0.72,0.92 yuan and 1.21 yuan respectively, and the corresponding PE is 34.5x, 27.1x and 20.6x respectively. As the prepreg leader, the company is in the lead in military strength. Actively layout of civilian products, profitability continues to improve, performance is expected to continue to grow, maintain the "buy" rating.

Risk tips: the progress of military aircraft installation is not as expected; the construction of civil aircraft projects is not as expected; the transformation of machine tool business is not up to expectations; performance prediction and valuation judgment is not up to the expected risk.