Core views:
China's leading fighter mainframe, with aviation product manufacturing as the core, integrating scientific research, production, testing, test flights, and service guarantee, is one of the complete aircraft suppliers of aviation defense equipment in China. According to the company's official website, in 2017, 100% of the aviation industry Shen Fei's shares were injected into China Airlines Shen Fei, achieving the overall listing of core military assets, and is known as “the first stock of Chinese fighter aircraft”.
Core investment logic: (1) On the revenue side, the company is a major aviation equipment manufacturer such as fighter jets and drones in China, benefiting from large-scale equipment installation and upgrading, and the second military trade growth curve can be expected to grow; (2) On the profit side, the company is the only aircraft main engine manufacturer with a net interest rate exceeding 5% in the past five years; aircraft assembly units have a static economy of scale, and the dynamic learning curve is expected to gradually reduce stand-alone manufacturing costs. Through aircraft modification, etc., it is expected to promote a steady increase in the profitability of leading aircraft; (3) Was the first to complete One of the main aircraft manufacturers with equity incentives. The company has implemented a ten-year equity incentive plan. It has now completed the first phase of equity incentives and released the second phase of the equity incentive plan, demonstrating the company's firm confidence in long-term continuous growth in performance; (4) As a “mainframe manufacturer” in the aviation industry chain, it is expected that it will continue to benefit from supply chain reforms, and the maintenance business can be expected to grow. A strategic cooperation framework agreement was signed with the Shenyang Municipal Government and the Aviation Industry Group to promote the construction of surrounding industrial clusters, acquire Jilin Airlines and participate in the Yangzhou Collaborative Innovation Research Institute of the Shenyang Aircraft Design Research Institute to build an integrated aviation industry chain for research and development.
Profit forecast and investment suggestions: EPS is expected to be 1.32/1.65/2.07 yuan/share in 24-26, respectively. It is expected to continue to benefit from equipment installation and upgrades, strengthen core capabilities in supply chain physical efficiency reforms, promote the construction of surrounding industrial clusters, acquire Ji Airlines, and participate in Yangzhou Academy to build an integrated aviation industry chain. “One aircraft and three” lays out the second military trade growth curve, adding equity incentives and improving quality and efficiency, without considering fixed increases, giving a PE valuation of 40 times in 24 years, corresponding to a reasonable value. 52.85 yuan/share, maintaining the “Overweight” rating.
Risk warning: equipment deployment requirements and delivery fall short of expectations; risk of major policy adjustments; risk of military budget fluctuations.