Core views:

Incident: The company announced its 2024 quarterly report, achieving operating income of 206 million yuan, an increase of 54.72% over the previous year; realized net profit attributable to mother of 1.3435 million yuan, turning a loss into a profit, or -028 million yuan in the same period last year; realized net profit deducted from mother of -014 million yuan, compared to -032 million yuan for the same period last year.

Comment: Revenue continues to grow at a high rate, and changes in product structure affect gross profit margins. It is anticipated that the main aerospace business will be flexible in 24, the civil products business is expected to achieve continuous breakthroughs, and overseas business is expected to expand at an accelerated pace. Revenue maintained relatively rapid growth. The 24Q1 revenue growth rate was 54.72% year-on-year, mainly due to the expansion of the company's market application fields, and the increase in revenue from services, equipment and raw materials. On the profit side, gross margin declined due to the impact of product structure, and financial income after a reduction in equity incentive fees+fixed increases partially offset the impact. In terms of gross margin, the company's 24Q1 gross margin decreased by 11.16 and 7.37 percentage points, respectively, from 23Q1, or was mainly affected by product structure; equity incentive amortization was 78 million yuan for the full year of '23, and equity incentive expenses were about 40 million yuan, evenly shared quarterly. Management expenses were reduced from 37 million yuan in 23Q1 to 33 million yuan in 24Q1; the R&D expense ratio was reduced from 31% in 23Q1 to 26% of 24Q1; financial expenses of 23Q1 were 0.05 billion yuan. This year's 24Q1 period was 0.2 billion yuan; revenue from fair value changes in the first quarter of this year was 8.19 million yuan, compared to 300,000 yuan for the same period last year. Cash flow repayment capacity is good. 24Q1 sales products received 169 million yuan in cash, a year-on-year growth rate of 61%. On the balance sheet, inventory was 607 million yuan in 24Q1, 515 million yuan at the end of 23Q4, and 573 million yuan in 23Q1, with year-on-month and year-on-year growth rates of 18% and 6%. Contract liabilities increased month-on-month compared to the end of the fourth quarter of last year. 23Q4 was worth 0.25 billion yuan, 24Q1 was 35 million yuan, and the year-on-month growth rate was 40%.

Profit forecast and investment advice: We expect the company's EPS to be 1.59/2.53/3.80 yuan/share in 2024-26, maintaining the judgment of a reasonable value of 99.08 yuan/share, corresponding to a 24-year PE of 62 times, maintaining an “gain” rating.

Risk warning: increased production capacity to absorb risks; downstream concentration, etc.; increased competition risks, etc.