Incident: The company released its 2024 quarterly report on April 29. 1Q24 achieved revenue of 9.49 billion yuan, YoY +3.5%; net profit to mother of 720 million yuan, YoY +11.6%; net profit after deducting non-return to mother of 720 million yuan, YoY +12.6%. The company's performance is basically in line with market expectations.
Profitability increased in 1Q24. In terms of profit margin, 1Q24 gross margin was 12.1%, up 0.77ppt year on year; net margin was 7.5%, up 0.58ppt year on year. Profitability increased in 1Q24. In terms of expenses, the company's expense ratio for the first quarter of 2024 was 2.5%, a year-on-year decrease of 0.77ppt. Among them: 1) the sales expense ratio was 0.01%, a year-on-year decrease of 0.04ppt; 2) the management expense ratio was 1.8%, up 0.12ppt; 3) the R&D expense ratio was 1.1%, a year-on-year decrease of 0.50ppt; R&D expenses were 110 million yuan, a decrease of 28.3%; 4) the financial expense ratio was -0.5%, which was -0.1% in the same period last year, mainly due to an increase in interest income.
The size of accounts receivable increased by 24% from the beginning of the year; cash for purchasing goods and receiving labor payments increased more. As of the end of 1Q24, the company: 1) Accounts receivable and notes were $11.67 billion, up 23.8% from the beginning of the year, mainly due to an increase in sales products; 2) Monetary capital of $8.06 billion, a decrease of 48.2% from the beginning of the year, mainly due to an increase in payment of purchase payments; 3) Inventory of $7.05 billion, a decrease of 39.4% from the beginning of the year; 4) Net cash flow from operating activities was $5.27 billion, down 12.3% from the beginning of the year; 6) Net cash flow from operating activities was - 7.27 billion yuan, or -410 million yuan in the same period last year, mainly due to an increase in cash from purchasing goods and receiving labor payments in the current period; 7) Net cash flow from investment activities was -320 million yuan, compared to -50 billion yuan in the same period last year, mainly due to an increase in cash payments for the purchase and construction of fixed assets, intangible assets, and other long-term assets in the current period.
Net profit is expected to increase by 25% in '24; accelerate the deployment of a full-life cycle guarantee system for aviation equipment.
In terms of the financial budget for the new year, the company announced its 24-year business plan on April 20, 2024. It is expected to achieve revenue of 51.03 billion yuan, YoY +10.3%, mainly due to an increase in product sales; it is expected to achieve net profit of 3.76 billion yuan and YoY +25.0%, maintaining rapid growth. Furthermore, the company disclosed that in 2024, the amount of related deposits is expected to increase from 26 billion yuan in 23 to 275 billion yuan, which may indicate that downstream demand will maintain a booming trend.
In terms of maintenance business, on April 23, 2024, Jilin Airlines signed “Capital Increase Agreements” with China Airlines Shen Fei, Shen Fei Enterprise Management, and new investors, the Aviation Industry Industry Fund, and the National Industrial Investment Fund. After the completion of this capital increase and share expansion, China Airlines Shen Fei is still the controlling shareholder of Jihang Company holding more than 51% of the shares. The company strengthens maintenance capacity building by introducing social capital to achieve vertical expansion of the industrial chain. We believe that with the continuous expansion of aviation defense equipment, the market size may accelerate in the future after maintenance and guarantee, and the company is expected to benefit deeply.
Investment advice: The company is one of the leading aviation equipment in China. In recent years, the company's aviation defense equipment has accelerated iterative leapfrogging, and the integrated R&D, manufacturing/repair industrial layout has continued to deepen, and lean management has achieved remarkable results. Taking into account the increasing demand boom in the company's downstream demand, we raised the company's net profit from 2024 to 2026 to 3.783 billion yuan, 4.651 billion yuan, and 5.666 billion yuan respectively. The current stock price corresponds to 2024-2026 PE to 28x/23x/19x. Maintain a “Recommended” rating.
Risk warning: order growth falls short of expectations; supply chain supporting management risks, etc.