Incidents:
The company published its 2023 annual report. According to the company's announcement, the company achieved revenue of 4.780 billion yuan in 2023, an increase of 7.50% over the previous year, and achieved net profit of 1,031 billion yuan to mother, an increase of 34.90% over the previous year. 2023Q4 achieved revenue of 1,157 billion yuan, a year-on-year increase of 6.90%, and realized net profit to mother of 187 million yuan, an increase of 99.80% over the previous year. The company's 2023 results are in line with market expectations.
Comment:
Demand from the main aviation materials industry is being released at an accelerated pace, driving steady revenue growth. According to the company announcement, the company achieved revenue of 4.780 billion yuan (yoy +7.50%) in 2023. By product, the new aviation materials business achieved revenue of 4.671 billion yuan, an increase of 7.20% over the previous year, mainly due to the increase in sales of aviation composite raw material products and brake products; the equipment business achieved revenue of 66 million yuan, a decrease of 21.5% year on year, mainly due to the year-on-year decline in machine tool products. According to our analysis, with the accelerated release of military aircraft and the accelerated implementation of civil aviation orders, the downstream demand for new aviation materials business continues to increase, and it is expected that the company's revenue will continue to grow steadily in 2024.
Cost reduction and efficiency were combined with product structure optimization, and the company's performance grew rapidly. According to the company's announcement, the company achieved net profit of 1,031 billion yuan (yoy +34.90%) in 2023. According to our analysis, 1) the company reduced redundant costs and achieved remarkable results in cost reduction and efficiency. The net interest rate in 2023 was 21.71%, up 4.45 pcts from the same period last year; 2) the company continued to optimize the product structure, increasing the share of the new aviation materials business with high gross margin, while actively promoting the improvement of equipment processing capacity and business expansion, which led to an increase in profit levels. The overall gross margin in 2023 was 36.75%, an increase of 5.81 pcts over the same period last year.
As downstream demand continues to be released and scale effects become apparent, the company's profitability is expected to increase further.
Operating cash flow is sufficient and steady, and R&D investment is increasing the future. According to the company's announcement, the company's cash flow from operating activities in 2023 increased 1.24% over the previous year, with good repayment conditions and abundant cash flow; the company spent 176 million yuan on R&D in 2023, an increase of 7.46% over the previous year, further strengthening its market position and technical advantages in the field of new aviation materials. The increase in cash flow highlights the company's good operating conditions and steady risk bearing capacity. The increase in R&D investment shows that the company is committed to promoting the optimization and upgrading of the industrial structure and improving product competitiveness, providing a solid foundation for continuous and stable performance growth in the future.
A core enterprise in China's aviation composite materials industry, downstream demand boosts rapid growth in performance. 1) Currently, the main aircraft of the Navy and Air Force are still being upgraded and accelerated, and there is room for growth in demand for aviation composites; 2) large domestic aircraft have begun the commercialization process, the transformation of the civil aviation aircraft manufacturing industry is compounded by rising demand for large domestic aircraft, and the domestic advanced composite materials industry continues to be booming; 3) The company occupies a central position in military and civil aviation composites and is expected to fully enjoy the dividends of market expansion. We expect the company's performance to maintain a high compound growth rate in the next few years.
The 2024-2025E profit forecast was lowered and the “Buy” rating was maintained. Considering changes in product prices, the superposition production process needs to be further optimized. We lowered the company's net profit forecast for 2024-2025E to 1,689/1,611 billion yuan (previous value was 1.36/1,702 billion yuan), and the net profit forecast for 2026E was 1.934 billion yuan. The PE corresponding to the current stock price is 23/18/15 times. Considering that the company is a core enterprise in the aviation carbon fiber composite field, driven by future demand for military and civilian aircraft, the company's long-term performance is expected to continue to grow at a high rate, so it maintains a “buy” rating.
Risk warning: The growth rate of military spending falls short of expectations; equipment procurement falls short of expectations; demand for aviation composites falls short of expectations.