2023 results are in line with market expectations
The company announced its 2023 results: achieved operating income of 46.248 billion yuan, YoY +11.18%; realized net profit of 3.07 billion yuan, YoY+ 30.47%; realized net profit of 2,910 billion yuan after deduction, YoY +32.78%. Looking at a single quarter, 4Q23 achieved operating income of 11.616 billion yuan, YoY +2.63%; realized net profit to mother of 643 million yuan, YoY +13.87%. The results are in line with market expectations.
Development trends
The main aviation industry continued to grow steadily, and the net interest rate for improving quality and efficiency reached a record high. 1) In 2023, the company's aviation products achieved revenue of 45.953 billion yuan, YoY +11.39%. The company's revenue has maintained a steady growth trend in recent years, and the 2020-2023 revenue CAGR reached 19.19%, demonstrating the continued boom in the domestic aviation manufacturing industry chain. 2) The company's gross margin/net margin in 2023 was 10.95%/6.51%, up 1.00pp/0.95ppt year-on-year. The company's effect of improving quality and efficiency is obvious, profitability has been further improved, and the net interest rate level has reached a record high.
Investment in R&D continues to be increased to promote basic applications and cutting-edge technology research, and cash flow is under pressure in the short term. 1) The company's expense ratio for the 2023 period was 3.69%, with a year-on-year increase of 0.42ppt. Among them, sales/management/finance expenses were -0.01/+0.08ppt to 0.03%/2.17%/-0.62%, R&D expenses increased 31.85% year over year to 976 million yuan, and R&D expenses reached 2.11%. The company's basic application and cutting-edge technology research continued to advance, achieving dozens of core key technology breakthroughs around equipment development to ensure the advanced nature of core technology. 2) The net cash flow from the company's operating activities in 2023 was -4393 billion yuan, a year-on-year decrease of 7.071 billion yuan, mainly due to an increase in cash for purchases and payments.
Raise capital to expand production to optimize the industrial layout and consolidate the leading position of aviation aircraft. In December 2023, the company announced the “Plan for Issuing A Shares to Specific Targets”. It plans to issue shares to raise no more than 4.2 billion yuan, and will invest in the construction of Shenfei's partial relocation, composite production capacity construction, titanium alloy production capacity construction, and aircraft maintenance guarantee capacity improvement. We believe that capacity construction is expected to help further enhance the competitiveness of the company's main aviation industry, enhance aircraft maintenance and support capabilities, and help the company achieve vertical extension downstream of the industrial chain and continuous optimization of the industrial structure. The company is expected to give full play to the leading role in the industry and drive the further development of China's aviation industry chain.
Profit forecasting and valuation
Taking into account factors such as downstream demand, the company's product delivery, and increased profit margins due to continuous improvement in quality and efficiency, we lowered our 2024 revenue forecast by 17.5% to 51.81 billion yuan, kept the 2024 net profit forecast unchanged at 3.636 billion yuan, and introduced a 2025 net profit forecast of 4.466 billion yuan. The current stock price corresponds to 2024/2025 27.1/22.0 x P/E. We maintain our outperforming industry rating. Considering the recent decline in the industry valuation center, we lowered our target price by 24.4% to 45.37 yuan, corresponding to 34.4/28.0x P/E in 2024/2025, with a potential increase of 27.0%.
risks
1) Macroeconomic environment and policy risks; 2) Orders and product deliveries fall short of expectations.