Strong profit growth in 23 years, maintaining a “buy” rating
China Airlines Shen Fei released its annual report, achieving revenue of 46.248 billion yuan (yoy +11.18%) and net profit of 3.07 billion yuan (yoy +30.47%) in 2023. Considering that downstream demand for military aircraft is growing steadily, we lowered the company's aviation product revenue forecast. The company's 2024-2026 EPS is expected to be 1.34, 1.67, and 2.02 yuan respectively (1.37 and 1.75 yuan before 24-25). Comparable company Wind unanimously expected the average PE value to be 48 times. Considering that in comparable companies, Zhongzhi Co., Ltd. has completed assembly asset injection and that aviation power ushered in an inflection point in profit margins in 23 years, we lowered the valuation premium and gave the company 48 times PE in 24 years, with a target price of 64.32 yuan (previous value of 52.32 yuan), maintaining a “buy” rating.
The batch production test flight mission was successfully completed, and the quarterly balanced production achieved a new breakthrough. The company's revenue in 2023 increased 11.18% year-on-year to 46.248 billion yuan. According to the company's annual report, the company's mass production test flight mission was completed 36 days ahead of schedule in 2023. The company's 23Q1-Q4 revenue accounted for 20%/30%/25%/25% of the whole year, respectively, achieving a new “quarterly balance” record. In terms of manufacturing, the company has achieved cross-generational development of aircraft manufacturing. In recent years, the company has actively promoted the application of advanced technology and intelligent manufacturing production models around model development requirements, carried out in-depth technical research on precise parts manufacturing and assembly system integration, and vigorously promoted the development of parts manufacturing and assembly integration to automation and intelligence. It has made substantial progress in the application of digital intelligent workshops, flexible assembly lines, and key digital and intelligent manufacturing technologies, and has reached a new level of balanced production.
Give full play to the responsibility of “chain length” and continue to improve profitability
The company's gross margin level for the full year of 2023 increased by 1.00 pct to 10.95% year on year, net margin increased 0.95 pct to 6.51% year on year, and deducted non-net interest rate increased 1.02 pct to 6.29% year on year, all of which reached the highest level in history. Cost reduction and efficiency in the manufacturing process led to a continuous increase in overall gross margin level. The company's R&D expenses in 2023 increased by 31.85% to 976 million yuan. The main reason was that the company actively carried out basic application research and cutting-edge technology research, and continued to advance breakthroughs in core key technologies. Management expenses increased 12.38% to 1.04 billion yuan year over year, mainly due to increased expenses such as management consulting and equity incentives. The company's cost ratio increased 0.41 pct to 3.69% year on year, and the overall trend was stable.
The estimated value of related transactions increased steadily in 24, or showed the boom in the industrial chain in 2024.2.6. The company issued a budget announcement for related transactions. The total amount of related transactions in 2024 is estimated to be 61,063 billion yuan, which is basically the same as the estimated amount of 60.494 billion yuan in 2023, an increase of 0.94% over the previous year. Among them, the estimated amount of raw materials, fuel, power, etc. purchased from related parties totaled 24.623 billion yuan, an increase of 12.30% over the actual amount of 21.927 billion yuan incurred in 2023, mainly due to an increase in procurement volume. The company expects related procurement amounts to continue to grow in 2024, which may indicate that strong demand for defense products is still booming.
Risk warning: supply support risk, customer order risk.