2023 results are in line with market expectations
The company announced its 2023 results: operating income of 18.727 billion yuan, +7.16% year over year; realized net profit of 525 million yuan, -14.35% year over year; realized deducted non-net profit of 413 million yuan, -24.15% year over year.
Looking at a single quarter, 4Q23 achieved operating income of 5.769 billion yuan, +11.19% year over month, and +73.81% month on month; net profit to mother was 12 billion yuan, -88.77% year on year, and -90.26% month on month. The 2023 results are in line with market expectations.
Development trends
The main aerospace industry is growing steadily, and the cable sector is dragging down performance. 1) By product, the company's net revenue from the main aerospace business in 2023 was 14.349 billion yuan, an increase of 15.46% over the previous year, and the main aerospace industry maintained a steady growth trend. 2) The profit side was affected by the cable sector's depreciation of 179 million yuan, and the net interest rate was -0.69ppt to 2.80% year-on-year. Excluding the cable subsidiary Aerospace Electrician's caliber, the company achieved a revenue scale of 14.675 billion yuan during the reporting period, up 15.81% year-on-year with a year-on-year increase of 15.81%, and net profit to mother of 723 million yuan, an increase of 32.66% over the previous year.
R&D work is progressing in an orderly manner, and the business plan exhibition reflects confidence in growth. 1) The company's expense ratio was +1.04ppt to 16.06% year-on-year in 2023, of which the R&D expenditure ratio was +0.63ppt to 5.74% year-on-year. In 2023, the company's R&D work progressed in an orderly manner, becoming the overall payload unit in the satellite field. Space long-life laser communication technology realized orbital applications, and unmanned helicopters and unmanned carrier-based aircraft achieved many technological breakthroughs. 2) The company plans to achieve revenue of 20.5 billion yuan in 2024, an increase of 9.5% over 2023, reflecting the company's confidence in steady growth. 3) The company's cash flow from operating activities in 2023 was 1.02 billion yuan, and the net outflow was narrower than in '22 - 1,377 billion yuan.
Multiple initiatives strengthen industrial advantages, leading aerospace electronics companies may benefit from the acceleration of reforms. 1) The company completed targeted increases in 2023, raising 4.116 billion yuan for industrial capacity building; completed the capital increase of Nanjing Falcon Company to materialize the operation of the energy power system business; and Aerospace Feihong achieved general drone business control and transfer. We believe that the company's multiple mergers are expected to strengthen the company's industrial capabilities and leading edge in the fields of aerospace, unmanned equipment, inertial navigation, etc., and inject long-term growth momentum into the company. 2) The company announced in November 2023 that it intends to list and transfer 51% of Aerospace Electrician's shares to optimize or accelerate asset integration. We believe that the company is an important asset listing platform for the Aerospace Science and Technology Group. In the context of the State Assets Administration Commission continuing to push central enterprises to consolidate the company's quality improvement, the acceleration of state-owned enterprise reform is expected to help improve the company's asset quality and operating efficiency.
Profit forecasting and valuation
Considering the pace of release of the company's downstream demand, we lowered the company's net profit forecast for 2024 by 17.0% to 703 million yuan, and first introduced a net profit forecast of 851 million yuan for 2025. The current stock price corresponds to 32.3/26.7x P/E for 2024/2025. We maintain the outperforming industry rating. Considering the company's leading edge in the aerospace electronics and unmanned equipment industry, the target price remained unchanged at 9.01 yuan, corresponding to 42.3/34.9x P/E in 2024/2025, with a potential increase of 31%.
risks
The construction of fund-raising projects falls short of expected risks; downstream demand falls short of expected risks; market competition increases the risk.