Incident: The company announced a pre-increase in its 2023 results. It is expected to achieve net profit of 1761.05 million yuan for the whole year, an increase of about 102.0% over the same period (statutory disclosure data), and an increase of about 30.3% over the same period (financial data after restatement).

The absorption and merger of China Aviation Mechatronics has been implemented. The company expects to achieve rapid annual profit growth of 1,761 billion yuan in 2023, an increase of about 102.0% over the same period (statutory disclosure data) and an increase of about 30.3% over the same period (financial data after restatement); it is estimated that net profit without return to mother will be 1,311 billion yuan, an increase of about 88.6% year over year (financial data after legal disclosure data), and an increase of about 86.9% year over year (financial data after revision).

The company's share exchange, absorption and merger with China Aviation Electromechanical has been completed. The company's profitability has improved throughout the year, and it has maintained rapid growth on the profit side. Looking at a single quarter, 2023Q4 expects to achieve net profit of 111 million yuan, a year-on-year decrease of about 37.3% and a month-on-month decrease of about 82.3%, or due to quarterly fluctuations in performance and fluctuations in the pace of short-term orders.

The amount of daily related transactions has increased steadily to promote enterprise development

The company's estimated deposit limits and loan limits for daily related transactions in 2022 are 4.1 billion yuan and 6 billion yuan. After absorbing and merging China Aviation Electromechanical, the above two were adjusted to 12.1 billion yuan and 11 billion yuan. The actual accrued values for January-November 23 were 7.703 billion yuan and 7.048 billion yuan, respectively. In December '23, the company expects the two major quotas mentioned above to be raised to 13 billion yuan in 2024, down from 6.2 billion yuan to 6 billion yuan, sales of goods from 21.5 billion yuan to 22 billion yuan, provision of labor services from 400 million yuan to 450 million yuan, leasing amounts from 70 million yuan to 90 million yuan, and remain at 480 million yuan, 135 million yuan and 1 billion yuan respectively. The amount of daily related transactions generally showed an upward trend, reflecting that the company has a more active plan for 24 years, which may provide a guarantee for continued growth in performance throughout the year.

The merger and absorption established a comprehensive platform+capital increase subsidiary to enhance the company's core competitiveness. In the first half of '23, China Aviation Electronics absorbed and merged China Aviation Electromechanical to establish a “China Aviation Airborne” comprehensive platform through specialized integration of assets and business, which is expected to achieve complementary advantages, enhance airborne system equipment development capabilities, and build a world-class aviation airborne systems supplier. In October '23, the company plans to use 160 million dollars in cash to increase Huayan meter's capital with the aim of enhancing the subsidiary's operating efficiency and development potential and supporting the company's main business. At present, the company is a comprehensive platform for avionics systems for the aviation industry and is the main supplier of avionics systems in China.

Raise capital to strengthen industrial construction and provide guarantees for future R&D and production tasks. In the first half of '23, the company raised 5 billion dollars for the construction of projects to increase the production capacity of airborne products such as aviation gas induction subsystems, construction projects to increase production capacity of hydraulic actuators, and aviation power system production capacity improvement projects to provide financial support, increase scientific research capabilities, expand market share, and ensure the completion of production tasks.

Profit forecast: The company's net profit from 2023 to 2025 is estimated to be 17.61, 21.26, and 2,646 billion yuan, respectively. The corresponding EPS is 0.36, 0.44, and 0.55 yuan, respectively, and the corresponding PE is 32.67, 27.06, and 21.74 times, respectively, covered for the first time, giving it a “recommended” rating.

Risk warning: Market competition increases risk, supply chain risk, R&D failure risk, product quality risk.