Performance is in line with expectations, and asset structure has been greatly optimized
Overall, it was in line with expectations, and the month-on-month profit growth rate in a single quarter was impressive. The company achieved revenue/net profit of 207 million yuan/ 51 million yuan respectively in the first three quarters of 2023, +27.79%/+10.77%, respectively. 2023Q3 revenue/net profit of 99 million yuan/33 million yuan respectively, +14.6%/-1.2% year-on-year, and +19.7%/+173.2%, respectively. Overall performance was in line with expectations. Q3 revenue increased year-on-year, and net profit growth in the single quarter was impressive month-on-month.
In terms of profitability, the gross margin/net profit margin for the first three quarters of 2023 was 56.77%/24.67%, respectively -12.22pct/-3.79pct year-on-year. Looking at a single quarter, 2023Q3 gross margin/net profit margin was 53.12%/33.66% respectively, year-on-year -17.65pct/-5.41pct, respectively, and -7.22pct/+18.92pct month-on-month. Profit margins declined year over year.
On the cost side, the comprehensive cost rate for the first three quarters was 30.65%, year-on-year -6.71 pct, and the sales/management/R&D/financial expense ratio for the first three quarters was 3.05%/11.69%/16.64%, -0.73%, -0.90/-1.32/-3.21/-1.27pct, respectively. The management expenses rate dropped significantly year over year, or the main factor was an increase in fee control capacity.
In terms of cash flow, net operating cash flow for the first three quarters was -120 million yuan, compared to -59 million yuan for the same period last year. The main reason was the increase in the number of tasks undertaken and the company increased its raw material reserves; at the same time, the company deferred payment of taxes in the early stages.
In terms of asset structure, the company's balance ratio at the end of the third quarter was 23.95%, year-on-year -16.51 pct, and the company's asset structure was greatly optimized. The contract debt was 22 million yuan, a record high since 2019.
A large number of low-orbit satellites can be expected to be stacked and launched, and COMAC has received the largest single order so far
The deployment of low-orbit communication satellite constellations is speeding up. Recently, Galaxy Aerospace successfully completed the first domestic terminal-to-terminal low-orbit satellite communication test on Lingxi 03. The communication delay can be reduced by 50%. This launch is also the first time that China has verified multi-star stacked launch technology in orbit, and will provide technical support for the rapid deployment of China's low-orbit communication satellite constellations. The company has now mastered a number of core technologies related to space-borne antennas, satellite communication stations, monitoring and control stations, and RCS test equipment, which can help seize the explosive market demand and important opportunities for satellite communications, monitoring, control and testing equipment.
Orders for large domestic aircraft are on the fast track. On September 28, 2023, China Eastern Airlines once again ordered 100 large C919 airliners from COMAC. The list price is about RMB 71,080 billion, the largest single order for the C919 large airliner to date. Furthermore, at the 20th East China Expo, Brunei Airlines and COMAC signed letters of intent to purchase 15 C919 and ARJ21 aircraft, with a total value of about 2 billion US dollars. The C919 has gone overseas for the first time, which is of iconic significance. The company has been undertaking C919 process equipment development since 2013, and in 2019, the company and Shangfei Company, a wholly-owned subsidiary of COMAC, established Hunan Feiyu in a joint venture. The cooperation is exclusive and is expected to benefit from the volume of large domestic aircraft.
Profit forecasting
Taking into account the broad prospects of the company's aerospace industry equipment and satellite communications business, and the gradual release of capital production capacity over the next three years, we forecast that the company's 2023-2025 revenue will be 5.25, 7.60, and 1,211 billion yuan, EPS is 0.42, 0.62, and 0.96 yuan respectively, and the current stock price corresponding to PE is 73.5, 50.5, and 32.5 times respectively. As a high-growth aerospace supplier, the company is deeply tied to downstream high-quality customers, maintaining a “buy” investment rating.
Risk warning
1) There is a risk that new technology will replace the aerospace sector; 2) the customer concentration is too high; 3) the implementation progress of fund-raising projects falls short of expectations; 4) the loss of core technical personnel; 5) the development of the satellite communications industry falls short of expectations; and 6) the commercialization of large domestic aircraft falls short of expectations.