Core views:
Incident: The company announced the materials of the 2023 Annual General Meeting of Shareholders. In the meeting materials, it is expected to achieve operating income of 51,026 billion yuan (up 10.33% from last year's actual increase and 10.71% increase over last year's budget) and net profit of 3,762 billion yuan (up 25.00% from last year's actual increase, 28.84% increase over last year's budget).
Comment: The 24-year budget continues the trend of increasing profitability, and the degree of completion of historical budgets is high. It is estimated to achieve revenue of 51.26 billion yuan (YoY +10.33%) in 24, mainly due to increased sales; operating costs of 44.618 billion yuan (YoY +8.34%), and net profit of 3,762 billion yuan (YoY +25.00%).
On the cost side, the growth rate of R&D expenses is higher than the growth rate of revenue. Expenses are expected to increase 21.12% year on year during the 24-year period. Among them, management/R&D expenses increased 14.3%/14.14% year on year, respectively, and financial expenses - 208 million yuan. On the asset side, the increase in construction projects or the orderly development of production capacity is expected, with total assets of 68.014 billion yuan (YoY +22.62%) for 24 years, mainly due to an increase in accounts receivable and construction in progress; total liabilities of 48.566 billion yuan (YoY +23.86%), mainly due to an increase in accounts payable; and owners' equity of 19.448 billion yuan (YoY +19.63%), mainly due to an increase in profit. On the cash flow side, the total cash inflow for 24 years is expected to be 44.025 billion yuan, an increase of 12.78 billion yuan over the same period of the previous year; total cash expenditure is 51,016 billion yuan, an increase of 12.848 billion yuan over the same period last year. The company's historical budget completion rate is high. The revenue completion rate for 21-23 was 100%/102%/106%, respectively, and the net profit completion rate was 103%/109%/103%, respectively.
Profit forecast and investment suggestions: EPS is expected to be 1.40/1.80/2.33 yuan/share in 24-26, respectively. It is expected to benefit from equipment upgrades to strengthen core capabilities, promote the construction of surrounding industrial clusters, acquire Jihang and participate in Yangzhou Institute to build an integrated research and repair industrial chain, lay out the second military and trade growth curve, and superimpose equity incentives and quality and efficiency, and give a PE valuation of 40 times in 24 years, corresponding to a reasonable value of 56.00 yuan/share, maintaining a “gain” rating.
Risk warning: Equipment demand and delivery fall short of expectations, policy adjustments, military budget fluctuations, company financial budget report proposals require approval by the shareholders' meeting, etc.