Incidents:
The company released its 2023 performance report. According to the company's announcement, in 2023, it is expected to achieve revenue of 916 million yuan (yoy +36.25%), net profit to mother of 334 million yuan (yoy +0.29%), and net profit of 385 million yuan (yoy +23.30%) after deducting non-return to mother net profit. 2023Q4 achieved revenue of 314 million yuan (yoy +29.75%), net profit due to mother of 64 million yuan (yoy -52.24%), and net profit of 127 million yuan (yoy -2.31%) after deducting non-return net profit. The 2023 results fell short of expectations.
Comment:
The company's revenue growth rate was in line with expectations, and the performance growth rate fell short of expectations. According to the company's announcement, the steady increase in the company's revenue is mainly due to the continuous increase in customer model tasks, and orders for small-batch trial production of new products are increasing one after another. In October 2023, the company's four brands of stealth material products entered the small-batch trial production stage, and the current production and sales volume increased steadily compared to the same period last year. According to the company's announcement, the company's performance fell short of expectations, mainly due to the share payment fee confirmed by the holding subsidiary Shanghai Ruihuasheng about 186 million yuan; in addition, the newly established holding subsidiary is still in the production capacity construction period, causing losses of about 22 million yuan during the construction period.
Continue to promote the construction of fund-raising projects, and the construction of production capacity is progressing steadily. According to the company announcement: 1) Construction of the Huaqin Science and Technology New Material Park (Phase I) project is being accelerated. The structural stealth materials production workshop has begun to carry out equipment debugging and other work. The company has adopted the principle of use while construction is in progress. The Huaqin Science and Technology New Material Park (Phase II) project is also under construction; 2) Shenyang Huaqin Aviation Development is in progress; some production lines have begun first verification and trial production, and have passed the certification of important customer suppliers; 3) Nanjing Huaqin has now made business progress in the fields of acoustics laboratories, power plant noise control, wind tunnel laboratories, sound absorbing materials for buildings, rail transit, etc.; 4) Shanghai Ruihua and Shenyang Ruihuasheng have been set up and are actively carrying out research on acoustic superstructural materials such as aviation, underwater vehicles, and high-speed trains; 4) Shanghai Ruihua and Shenyang Ruihuasheng have already been set up and are actively carrying out pre-project research Construction work during the period.
The signing of major contracts one after another confirms the prosperity of the industry, and the high increase in the holdings of directors and supervisors shows confidence in development. According to the company announcement, 1) The company disclosed the announcement of the signing of the sales contract for batch production projects on January 17, 2024 and January 30, 2024, respectively. The tax-inclusive amounts of the contract reached 310 million yuan and 333 million yuan respectively, which is expected to have a positive impact on the company's current results. 2) Based on confidence in the company's future development prospects, the company's directors and supervisors expect to increase their holdings of the company's shares within 6 months from January 31, 2024, with a total increase of 10 million yuan to 20 million yuan.
A leading domestic specialty materials company with an outstanding market position. According to the company's announcement, 1) The company's stealth materials and camouflage material products have been mass-produced and applied. Currently, it is one of the few domestic enterprises that can fully cover the design, development and production of stealth materials at room temperature, medium temperature and high temperature. 2) As the modernization requirements of national defense increase, there is an urgent need to increase the number of military aircraft in China. Special materials have an outstanding strategic position and broad market space. 3) The company has a number of core technologies with independent intellectual property rights, and has a pioneering advantage in the industry. Furthermore, fund-raising projects help the company break production capacity bottlenecks and meet market demand.
The 2023-2024E profit forecast was lowered and the “Overweight” rating was maintained. Considering the increase in management expenses due to subsidiary share payments, the unreleased new production capacity, and the special functional materials business revenue or falling short of expectations, we lowered the 2023-24E annual revenue forecast for Special Functional Materials to RMB8.50/1,135 million (previous value was RMB945/1,339 million yuan), and lowered the company's 2023-2024E net profit forecast to RMB334/519 million (previous value was RMB441/621 million), and the additional profit forecast for 2025E is 707 million yuan. The current stock price corresponds to 2023- In 2025E PE was 48/31/23 times, respectively. Companies belonging to the same aerospace industry chain were selected, Aerospace Technology (aero engine and gas turbine parts), Guangqi Technology (next-generation metamaterials), and Platinum (R&D and production of metal 3D printing equipment) as comparable companies. Comparable companies' 2023-2025E annual average valuations were 71/45/32 times, respectively. The company's 2024E valuation was lower than the comparable company average, and considering that the company is a core domestic special functional materials enterprise, benefiting from the continuous improvement of the aerospace sector, strong external demand combined with the company's capital increase and production expansion, the future performance is expected to grow rapidly. Maintain an “Overweight” rating.
Risk warning: risk of demand fluctuations; risk of military price reduction; industry competition exacerbates risks; mass production of new products falls short of expectations.