The company released the “2023 Annual Report”. In 2023, it achieved revenue of 4.78 billion yuan, an increase of 7.50% year on year; realized net profit of 1.01 billion yuan, an increase of 34.90% year on year; realized net profit without return to mother of 1.06 billion yuan, an increase of 33.63% year on year.

The profit side achieved rapid growth, and the profitability of the new aviation materials business increased dramatically. The company achieved revenue in 2023 ($4.78 billion, +7.50% year over year), achieving 97.55% of the annual target; achieving total profit ($1,213 billion, +35.75%), achieving 103.15% of the annual target; and achieving net profit to mother ($1,031 million, +34.90%). By business, 1) New aviation materials business: achieved revenue ($4.68 billion, +7.20%), achieved 96.26% of the annual target, mainly due to sales growth of aviation composite raw material products and brake products in the current period; realized net profit to mother (1.97 billion yuan, +33.20% year over year), mainly due to changes in product structure, cost reduction and scale effects. Among them, ① aviation industry composites: achieved annual revenue (4.551 billion, +6.01% year over year), achieved net profit from mother (1,088 billion, +30.20% year over year), fully completed annual production tasks, and achieved effective improvement in quality and reasonable volume growth in main business indicators; ② Premium BaMu: achieved revenue (154 million, +95.76% year over year); achieved net profit to mother (13.749 million, year on year + 2,861.83%), the company strengthened product development, focused on increasing production capacity, and actively exploring markets and international market orders Significant growth. 2) Machine tool equipment business: Achieved revenue for the whole year (66.1796 million, -21.52% YoY), achieved 71.16% of the annual target; achieved net profit to mother (-30.9755 million, year-on-year loss of 2.8508 million). The main reason for loss reduction was due to increased gross profit contribution and reduced labor costs for redundant personnel due to changes in business structure.

Gross profit margin and net margin capabilities have been greatly improved. In terms of profitability, the company's gross sales margin during the period was 36.75%, up 5.81 pct year on year, mainly due to lower material costs and a year-on-year decrease in operating costs.

The company incurred sales expenses during the period (32 million, +13.78% year over year), mainly due to increases in labor costs, marketing expenses and travel expenses; management expenses (355 million, +25.12% compared to the same period), mainly due to increases in labor costs, repair costs and insurance premiums for the first batch (table set) products; financial expenses (-28 million, -024 million in the same period in '22), mainly due to a year-on-year decrease in interest expenses of the subsidiary aviation industry complex; the company's expense ratio was 7.51%, up 1.pct year-on-year from the same period in '22; . R&D expenses ($176 million, +7.46% year over year) are mainly due to increased investment in R&D of new aviation materials. Net profit margin was 21.71%, up 4.45pct from '22.

A number of capacity improvement projects are nearing completion, and related sales estimates are at the same level as in '22. In terms of balance sheet, the balance of projects under construction at the end of the period reached 273 million yuan, +80.26% compared with the end of the previous year. This is mainly due to an increase in expenditure on the aviation industry composite construction advanced pre-impregnation production plant of the subsidiary in the current period. 1) Currently, this project (advanced aviation pre-impregnation production capacity improvement project): Foundation treatment and underground infrastructure construction have been completed, the construction part of the project has basically been completed, and important equipment procurement and contract signing have been completed. It is expected to be put into use in 2024. 2) Carbon material products production line construction project: In order to expand production capacity, Yousai Bermuda completed an investment of 36.03 million yuan (total planned investment of 68 million yuan) during the reporting period, and completed the procurement, installation and commissioning of major process equipment; 3) Plant No. 5 wire repair and construction project: aimed at meeting the needs of civil aircraft composites. The project was completed and put into use during the reporting period, with an actual total investment of 29.0462 million yuan. In terms of related transactions, related sales are expected to be 4.5 billion yuan in 2024, which is the same as the estimated amount for 23, and an increase of 39.28% over the actual amount generated in 23.

The planned economic indicators for the year 24 continued to improve, and the industrial layout was optimized. The company's annual operating goals for 2023 are: revenue of 5 billion yuan and total profit of 1,282 billion yuan, an increase of 4.60% and 5.69% over the previous year. Among them, the new aviation materials business strives to achieve revenue of 4.912 billion yuan and total profit of 1,370 billion yuan. The machine tool equipment business strives to achieve revenue of 73 million yuan and total profit of -15 million yuan. In 2024, the company will 1) strengthen scientific and technological innovation: continue to promote application verification of domestic high-performance carbon fiber pre-impregnated products, development and engineering manufacturing of new honeycomb products, and research on key technologies for the overall molding of large structural fuselage wall panels for civil aircraft. 2) Ensure production delivery: Promote the verification of advanced pre-impregnation production lines and accelerate the construction of the first digitally intelligent pre-impregnation production line in China. 3) Optimize the industrial layout: accelerate the allocation of production resources for composite structural parts of civil aircraft and composite components for commercial engines to form a first-level supplier capacity; expand the international market, accelerate the certification of honeycomb products, achieve batch supply, and become an international supplier of cellular products; develop potential international sales markets on the basis of consolidating the existing commercial aviation brake disc secondary market.

Profit forecast: The company's net profit for 2024/2025/2026 is expected to be 11.47/13.14/1,504 billion yuan, corresponding to a valuation of 26, 22, and 20 times, maintaining a “highly recommended” rating.

Risk warning: Product orders fell short of expectations, and reform progress was lower than expected.