Comprehensive industrialization platform for advanced aviation materials: Beijing Aeronautical Materials Research Institute Co., Ltd. (“Aviation Materials Co., Ltd.”) is committed to the research, development, manufacture and sale of a series of high-tech products based on new aviation materials, new processes and new technology. The company has titanium alloy precision casting division, rubber and sealing materials division, aircraft cockpit transparent parts division, and high temperature alloy casting division. The main products are titanium alloy castings, rubber and seals, transparent parts, and high temperature alloy master alloys. The four major business divisions have all been developed by research departments under the Aviation Materials Institute, and the products have reached the leading domestic level and the world's advanced level.
Material performance determines the overall performance of equipment, and military and civilian demand drives the popularity of aviation materials to continue to rise: aviation materials are essential materials for the manufacture of aircraft, engine components, instruments, and random equipment. Normally, the level of material performance determines the performance level of engines and aircraft, that is, “one generation of materials, one generation of equipment.” Air supremacy is essential to modern warfare. In order to cope with the pressure of the external military environment, the installation and upgrading of our military aircraft will be accelerated. COMAC predicts that in 2022-2041, China Airlines is expected to receive 9,284 new aircraft with a market value of about 1.5 trillion US dollars, ranking first in the world in the number of new aircraft delivered. Fully building a world-class air force begins a new journey, and the civil aircraft market is poised for localization. Advanced aviation materials such as titanium alloy castings, rubber and seals, transparent parts, and high-temperature alloy master alloys will have broad market space in the future.
The IPO raised capital to comprehensively improve the technical level and production capacity of the four major businesses: the company's rubber, seals, and transparent parts businesses have had a gross margin level of 40% to 50% or more in recent years, with strong market competitiveness and profitability.
The 2023 IPO raised 7.1 billion yuan to build aviation high-performance elastomer materials and parts industry projects, aviation transparent parts development/pilot line projects, large-scale aircraft windshield projects, high-performance high-temperature master alloy products for aero engines and gas turbines, heat treatment and precision processing process upgrade projects for aerospace titanium alloy parts, etc. After completion, the company will add 1 highly automated aviation high-performance elastomer material and parts production line, 4 transparent parts R&D pilot lines, 1 large aircraft windshield transparent parts development line, 3 parent alloy R&D pilot lines, and 1 large-scale complex high-temperature structural parts mold research and development pilot line, further enhancing the competitiveness of the four major businesses in aero engines, aviation and other related markets.
Profit forecast, valuation and rating: The company has established a research and development system for advanced titanium alloy precision castings, rubber and sealing materials, aviation transparent parts, and high temperature alloy master alloys based on new aviation materials, new processes and technology; fully guarantees the supporting needs of aero engines, aircraft, helicopters and other models; further expands the military and civilian market, seizes the high-end market, and continues to consolidate and strengthen the company's leading position in various segments. We expect the company's net profit from 2023-2025 to reach 581, 7.79, and 1,014 billion yuan, corresponding to EPS of 1.29, 1.73, and 2.25 yuan. The current stock price corresponding to PE is 50X, 37X, and 28X, respectively. First coverage, giving the company a “buy” rating.
Risk warning: military review pricing risk; risk of raw material procurement price fluctuations; risk of increased market competition; risk of IPO price fluctuations.