Strong profit growth in 23 years, maintaining the “Overweight” rating

China Aviation Hi-Tech released its annual report. In 2023, it achieved revenue of 4.780 billion yuan (yoy +7.50%), net profit to mother of 1,031 billion yuan (yoy +34.78%), and deducted non-net profit of 1,006 billion yuan (yoy +35.43%). Considering the short term or fluctuating pace of aviation product delivery, we lowered the estimated revenue value of the new aviation materials business. The company's EPS for 2024-2026 is 0.80, 0.99, and 1.21 yuan, respectively (the value before 2024-2025 was 0.97 and 1.23 yuan), respectively. Comparable to the 24-year Wind, the average PE value was 18 times. Considering that the company was at the leading level in composite technology and industrial scale, the company was given 30 times PE in 24 years, with a target price of 24.00 yuan (previous value 27.16 yuan), maintaining the “gain” rating.

The profit of the new aviation materials business increased rapidly, and the machine tool business reduced losses year-on-year

By business, the company's new aviation materials business had revenue of 4.671 billion yuan (yoy +7.20%) and net profit of 1,097 billion yuan (yoy +33.20%), mainly due to sales growth of aviation composite raw material products and brake products in 2023, as well as changes in product structure, cost reduction and efficiency, and scale effects; the machine tool business achieved revenue of 66 million yuan (yoy -21.52%) and net profit of -0.31 million. The main reason for the loss reduction was the increase in overall gross profit contribution of changes in business structure and This is due to a decrease in labor costs to reduce redundant personnel.

The production and delivery of the new brand went smoothly, and profitability increased steadily

According to the announcement, the new brand was successfully produced and delivered in 2023. Combined with cost reduction, efficiency and scale effects, the company's profitability increased significantly. The annual gross margin was 36.75%, +5.81 pcts year on year, and the net margin was 21.71%, +4.45 pcts year on year. The company's expense ratio for the 2023 period was 11.18%, +1.03 pcts; of these, sales expenses were 0.32 million yuan, +13.78% year over year, mainly due to increases in labor costs, marketing expenses and travel expenses, etc.; sales expenses were 0.67%, +0.04pcts year on year; management expenses were 355 million yuan, +25.12% year on year, mainly due to increases in labor costs, repair costs and insurance premiums for the first batch (set) products. The management expense ratio was 7.44%, +1.05 pcts year on year; R&D expenses were 176 million yuan , +7.46% year-on-year, and the R&D expenditure rate was 3.67%, the same as the previous year.

The total profit target for 23 was exceeded, and the 24-year business plan grew steadily in 2023. The company's annual revenue plan completion rate was 97.54%, and the total profit plan completion rate was 103.15%. The company's revenue target for 2024 is 5 billion yuan, up 2.04% from the 23 target and 4.61% increase over the actual revenue in 2023; the total profit target is 1,282 million yuan, up 9.01% from the target for 23, and 5.68% higher than the total actual profit for 2023. Among them, the revenue target for the new aviation materials business is 4.912 billion yuan, up 1.03% from the target for 23, and up 5.16% from the actual revenue in 2023; the total profit is 1.37 billion yuan, up 5.71% from the target for 23, and an increase of 7.45% over the total actual profit in 2023.

Risk warning: industry competition risk, product pricing risk, product quality and production safety risk.