Strong profit growth in 23 years, maintaining a “buy” rating
Aviation Materials Co., Ltd. released its annual report, achieving revenue of 2,803 billion yuan (yoy +20.01%) and net profit of 576 million yuan (yoy +30.23%) in 2023. Of these, 23Q4 achieved revenue of 608 million yuan (yoy +18.19%, qoq -30.67%) and net profit to mother of 73.0.07 million yuan (yoy +82.42%, qoq -64.60%). Considering that overall downstream demand for aero engines is growing steadily, we lowered the company's revenue forecast for aviation parts. The company's 2024-2026 EPS is expected to be 1.61, 2.03, and 2.54 yuan, respectively (values were 1.79 and 2.32 yuan before 24-25). Comparatively, the company's 24-year Wind unanimously expected an average PE value of 35 times. Considering the company's obvious technical advantages and the high-quality resources of the Aviation Materials Institute, the company was given 39 times PE in 24 years, with a target price of 62.79 yuan (previous value of 80.55 yuan), maintaining a “buy” rating.
Revenue from basic materials and finished aviation parts increased rapidly. The profitability of non-aviation parts and processing services increased steadily by product. In 2023, the company: 1) Basic materials achieved revenue of 1,323 billion yuan, +19.79% year over year, mainly due to an increase in product orders, gross margin of 31.53%, -1.25pcts year on year, and gross margin remained stable; 2) The aviation finished parts business achieved revenue of 1,238 billion yuan, +23.87% year on year. The main increase in product orders was 32.47%, -5.80 pcts year on year, gross margin decreased Mainly due to changes in military tax exemption policies; 3) The non-aviation parts business achieved revenue of 124 million yuan, -15.48% year over year, mainly due to a decrease in product orders, gross margin of 15.24%, +2.46pcts year on year, mainly due to product restructuring; 4) Processing service revenue of 80.396 million yuan, +27.76% year over year, mainly due to an increase in orders, gross margin of 13.41%, +3.93 pcts year on year.
The expected value of related transactions is growing steadily, or indicates the company's development confidence in 24. According to the company's announcement, in 2024, the company will prioritize high-quality development to accelerate development progress, enhance innovation vitality, expand the depth of reform, and optimize internal governance. The company expects to purchase goods, receive labor and other services from related parties in 2024, an increase of 47.71% over the actual amount incurred in 2023; in 2024, the company expects to sell products, provide labor and other services to related parties of 1,054 million yuan, an increase of 23.44% over the actual amount incurred in 2023. The expected value of related transactions is growing steadily or indicates that the company's production schedule is full, demonstrating confidence in 2024 performance growth.
Many businesses have a high market share and a stable position in the industrial chain
The company's many businesses correspond to a high market share and industry position. 1) Titanium alloy casting business. The company can develop and produce titanium alloy castings for the vast majority of domestic aero engines, and is one of the few domestic suppliers of titanium alloy castings for international civil aviation; 2) rubber and sealing materials, essential materials for military aircraft/civil aircraft, the business has achieved multiple domestic “firsts”, leading domestic technological breakthroughs; 3) Transparent parts, key components for military aircraft, is the main supplier of transparent parts for fighter jets and helicopters in China; 4) High temperature alloy master alloys: supply-side domestic substitutation+demand-side strong consumables attributes, the company's “national team” has significant product coverage. All domestically mass-produced aero engines Products using superalloy master alloys.
Risk warning: risk of loss of core technical personnel; risk of fluctuation in raw material procurement prices.