Event: On October 30, the company released its three-quarter report for 2023, achieving revenue (2,795 million yuan, +32.35%), net profit from the mother (423 million yuan, +20.61%), and deducting non-return net profit (368 million yuan, +7.92%).
Results for the first three quarters increased steadily, while delivery slowed in the third quarter alone.
During the reporting period, the company continued to strengthen its own development around the “14th Five-Year Plan” strategic plan and business development needs, and business performance grew steadily. Revenue in the first three quarters increased 32.35% year-on-year, mainly due to growth in aviation, petrochemical and power forging businesses.
On a quarterly basis, 23Q1-Q3 achieved revenue (943 million yuan, +54.34%), (1,038 million yuan, +60.55%), (814 million yuan, -4.73%), and Q3 fell 21.58% month-on-month; respectively, net profit from the mother (143 million yuan, +33.38%), (155 million yuan, +27.09%), (125 million yuan, +2.84%), and Q3 revenue and net profit growth declined, or were delivered with downstream customers. It's related to the slowdown in pace.
From a profitability perspective, the gross margin of Q1-Q3 was 26.32%/27.08%/22.50%, respectively, and Q3 fell 4.58pct month-on-month, which is expected to be mainly due to changes in the delivery product structure.
The net interest rate for Q1/Q2/Q3 was 15.20%/14.92%/15.38%, respectively, and the Q2 net interest rate fell 0.28pct month-on-month, mainly due to the second quarter ① Asset impairment losses increased 2240.24% year over year due to the increase in inventory age, ② credit impairment losses were due to the increase in accounts receivable, which increased by 1907.54% year on year; the Q3 net interest rate was repaired, increasing 0.46pct over month, mainly because accounts receivable and inventory did not change much in the third quarter, so there was no need to account for related impairment losses.
Profitability remains stable, and R&D intensity continues to increase. The company's gross margin during the reporting period was 25.49%, a year-on-year decline of 0.42pct, or due to changes in product structure. The net interest rate was 15.15%, down 1.47pct year on year, and the decline in net interest was greater than the gross profit margin. The main reason was that the period fee rate increased by 0.62 pct to 7.92%, of which the R&D fee rate increased by 0.40 pct, mainly due to the company's continued increase in investment in product development in the aerospace and new energy industries. The sales rate increased by 0.32pct in the first three quarters, mainly due to the increase in wages for imported talents and increased business hospitality expenses. As the company continues to strengthen internal management, control production costs, and meet requirements for cost reduction and efficiency, profitability is expected to be restored.
Q3 Delivery may have slowed, and operating cash flow improved. According to the semi-annual report, as of the end of the second quarter, the company's accounts receivable increased by 68.89% from the beginning of the period to 1,390 billion yuan, indicating that the company delivered smoothly in the first half of the year; by the end of the third quarter, the company's accounts receivable fell 6.69% from the end of the second quarter, and inventory at the end of the third quarter increased from 953 million yuan at the end of the second quarter to 958 million yuan, indicating that the company's delivery may have slowed down, and some products were included in the inventory account in the form of products or inventory items. In addition, the net cash flow from the company's operating activities in the first three quarters of 2023 increased by 183 million yuan over the same period last year, mainly due to business growth in the first three quarters and increased repayments.
A leading military annular forging company, the booming development of the engine industry has driven the aviation business to continue to rise. 1) Looking at the competitive pattern, since forging products have multiple specifications and customized characteristics, the company needs to participate in design and finalization in the early stage of equipment design, and once the supply relationship is determined, the industry entry barriers are high, and the pattern is relatively stable; 2) Looking at the relationship between supply and demand, the replacement of new fighter jets in China has led to an increase in engine demand. Combined with the continuous increase in the proportion of localization, it is expected that the engine industry will usher in a period of rapid development. As one of the core suppliers of annular forgings for engines in China, the company is expected to usher in a period of rapid development. As one of the core suppliers of annular forgings for engines in China, the company is expected to usher in a period of rapid development. As one of the core suppliers of annular forgings for engines in China, the company is expected to usher in a period of rapid development. As one of the core suppliers of annular forgings for engines in China, the company is expected to usher in a period of rapid development. As one of the core suppliers of annular forgings for engines in China, the company is in service and pre-production The business is expected to continue to be fast Growth, and as an asset-heavy industry, the forging industry shows a scale effect after volume increases. It is expected that there may still be room for improvement in profitability.
Investment suggestions: The company is a leading enterprise in the annular forging industry in China. Military products have entered supply systems such as the Aviation Development Group, Aerospace Science and Technology Group, and Aerospace Science and Industry Group. Considering that the aero engine, rocket and missile fields are in a stage of rapid development, it is expected that the company's aerospace business is expected to continue to grow rapidly, and with the continuous increase in military products business with high gross margin, it will lay a firm foundation for the company's performance growth; the downstream civilian power and petrochemical industries are all pillar industries and will continue to consolidate the company's basic market. The company's net profit for 2023-2025 is estimated to be 6.1 billion yuan, 7.9 billion yuan, and 1.0 billion yuan respectively, with 20 times PE in '23. The corresponding target price is 100 yuan, maintaining the “buy-A” rating.
Risk warning: The aerospace business fell short of expectations; progress in the civil goods sector fell short of expectations.