The leading aerospace/aviation development/aerospace materials company, building the only material production platform company of China Aviation Development Group, is the aviation materials research platform (621) industrial development platform under China Aviation Development Group and the only listed subsidiary of the Aviation Materials Research Institute. The existing four major divisions of titanium alloy precision casting, rubber and sealing materials, aircraft cockpit transparent parts, and high temperature alloy casting all come from the core assets of the Aviation Materials Institute. In addition to fully covering the three fields of aviation, aviation development, and aerospace, the downstream is also used in various fields such as shipping, weapons, electronics, and nuclear industries.

Titanium alloy: As the supplier of titanium alloy precision castings from China Aviation Development, the company is in a leading domestic and advanced international position. It is the main manufacturer for the development and production of titanium alloy structural parts for China's aviation aircraft and engines, and is also one of the few domestic suppliers of titanium alloy castings for international civil aviation.

Rubber and seals: The company has undertaken the development and small-batch production tasks of almost all newly developed aircraft rubber and sealing materials in China. Sealant products for civil aircraft have been used in large C919 domestic aircraft, have an annual output capacity of 6 million fasteners, and are used in large quantities in various foreign civil aircraft.

Transparent parts: The company undertakes the development and production tasks of almost all transparent parts for fighter jets in China, and has a clear competitive advantage in the development of transparent parts for advanced helicopters. It has participated in the development and production tasks of newly developed helicopters, and has a high market share of the transparent parts market for newly developed helicopters.

Superalloy: The company is the only batch producer of high-temperature master alloys for aero engines under China Aviation Development. It undertakes the task of developing in-service engine products for turbofan, turbojet, turbojet, turboprop series in China. The products cover all mass-produced high-temperature alloy master alloys for aero engines in China.

Operating performance is growing steadily, and the positive performance of many indicators on the reporting side is expected to continue to exceed expectations. The compound growth rates of the company's operating income and net profit in 2020-2022 are expected to be 26.80% and 25.03% respectively. The net profit for the full year of 2023 is estimated to be 2.803 billion yuan, +20.01% year over year; realized net profit of 576 million yuan, +30.23% year over year, mainly due to increased customer demand and increased product delivery; the share of sales, management and finance expenses in revenue continued to decline. By the end of the third quarter of 2023, the value was 1.42% , down 0.42 percentage points from the previous year; inventory continued to be high, reflecting the continuous improvement of the company's operation and management efficiency, remarkable results in improving quality and efficiency. At the same time, there are sufficient orders in hand, or in the active production preparation stage, and performance is expected to be released rapidly as inventory is digested.

The size of the aerospace+aerospace+aerospace market continues to grow. Demand for the company's products is expected to continue to increase in military aviation. China's demand for high-performance military aircraft and engines will continue to remain high under the guidance of the “strategic air force”; in civil aviation, the number of civil aircraft in China is rising year by year, and the domestic alternative acceleration supply chain is expected to continue to benefit after the C919 is produced; in space, China's long-range precise strike force capability has aroused the “alarm” of the United States. We believe that the company's products fully meet the country's development needs and are expected to continue to benefit from increased demand in the aerospace+aviation market to achieve accelerated release of performance.

The IPO fund-raising project focuses on solving production capacity bottlenecks, and collaborative resonance boosts the company's performance growth. The company's four major business segments are highly industrialized. They have all formed a certain scale, but production capacity is seriously insufficient. The company raised funds to build 5 production lines through the IPO. Among them, the titanium alloy project is expected to help the company establish the urgent need to gradually transform existing products into a finished state and deliver the main models of aero engines and aircraft to help open up new market space; the rubber and sealing materials project is expected to effectively mitigate the problems of insufficient production area and equipment for some products in the rubber and sealing materials division after moving from the development stage to the small-batch production stage, and help consolidate and enhance the company's market position and competitive advantage; the transparent parts project is expected to enhance the transparency of the company's military and civil aircraft cockpits The R&D and production capacity of components makes up for the existing insufficient R&D and production capacity, and enables a leap from military aircraft to civilian aircraft, opening up new market space; the superalloy project will effectively enhance the production capacity and manufacturing technology of the company's advanced superalloy materials, promote the pace of localization of advanced superalloy materials, and help the company establish a more stable position in the industry.

Profit forecast: In summary, we believe that the company's four major business segments are deeply in line with the country's strategic development needs and are expected to fully benefit from the continued growth in demand in the aviation, aviation and aerospace markets, and the performance is expected to be rapidly released along with increased production capacity. The company is expected to achieve operating income of 28.03/3397/4,092 billion yuan in 2023-2025, and achieve net profit of 576/7.25/891 million yuan, corresponding to EPS of 1.28/1.61/1.98 yuan/share, corresponding to PE 38.80/30.86/25.09x, maintaining the “recommended” rating.

Risk warning: military review pricing risk, risk of changes in market demand, risk of fund-raising projects falling short of expectations.