Report summary

Event: The company announced on April 20 that the company's revenue in 2023 (1,408 billion yuan, +4.45%), net profit to mother (901 million yuan, +4.97%), net profit after deducting non-return to mother (65 million yuan, +18.59%), gross profit margin (20.70%, +0.66pcts), net profit margin (6.43%, +0.03pcts).

The company's 2024-quarterly revenue (RMB 204 million, -2.70%), net profit to mother (98.360,000 yuan, +8.57%), net profit net profit after deducting non-return to mother (RMB 9.1603 million, +7.27%), gross profit margin (26.01%, +3.66pcts), net profit margin (4.82%, +0.50pcts).

Gross margin and net profit margin stabilized, and revenue performance grew steadily

In 2023, the company's revenue (1,408 billion yuan, +4.45%) grew steadily, and the revenue scale reached a record high. Specifically, the three major business segments (railway vehicle operation safety inspection and maintenance systems, intelligent test and simulation systems, microsystems and control components, nuclear industry and special environment automation equipment) have all achieved steady growth. The company's net profit to mother grew steadily (0.91 million yuan, +4.97%), and net profit not attributable to mother grew rapidly. Gross profit margin (20.70%, +0.66pcts) and net profit margin (6.43%, +0.03pcts) ended the continuous decline since 2017. This was mainly due to a recovery in gross margin in various business sectors, and the increase in the company's three-fee rate (8.67%, +1.17pcts) and tax expenses (19.3433 million yuan, +14.63%) .

In the first quarter of 2024, the company achieved a slight decrease in revenue (RMB 204 million, -2.70%), net profit attributable to mother (RMB 9.833,600, +8.57%) and net profit net profit (9.1603 million yuan, +7.27%) increased steadily, gross profit margin (26.01%, +3.66pcts) increased, and net interest rate (4.82%, +0.50pcts) increased, mainly due to better repayment of long-age accounts receivable in the previous period, leading to a year-on-year decrease in credit impairment losses of RMB 430.92 million. Year-on-year decrease Caused by 1,434,800 yuan and other reasons.

The railway business is gradually expanding the international market, and the test simulation and microsystems business is expected to benefit from the aerospace industry, which is expected to accelerate the company's focus on the three strategic industries of rail transit, aerospace, and nuclear industry, forming an industrial pattern with three major business segments: railway vehicle operation safety inspection and maintenance systems, intelligent test and simulation systems, and microsystems and control components, nuclear industry and special environment automation equipment.

① Railway vehicle operation safety inspection and maintenance business: In 2023, revenue (216 million yuan, +5.29%) increased steadily, accounting for 15.36% of revenue, and an increase in gross profit margin (23.36%, +1.24pcts). The subsidiary Kangtuo Information is responsible for part of the business.

The products mainly include an infrared axle temperature detection system for railway vehicles, a dynamic image detection system for vehicle operation faults, a trackside acoustic diagnosis system for early vehicle rolling bearing faults, a railside inspection system for vehicle operation quality, and related safety inspection informatization products. During the reporting period, the company signed a number of major project orders with various railway administrations of China Railway, and the “Yawan High Speed Rail” EMU operation fault image detection system, a major international implementation project, was successfully installed, commissioned and delivered.

② Intelligent test simulation systems and microsystems and control component business: Achieved revenue in 2023 (613 million yuan, +1.47%), accounting for 43.52% of revenue, gross profit margin (21.08%, +1.19pcts). The business is mainly managed by the subsidiary Xuanyu Space, and the net profit rate (12.20%, -0.61pcts) is basically stable in 2023.

The main products are used in control systems for complex intelligent equipment such as aerospace. Intelligent test simulation systems: including simulation verification platforms and ground test platforms for complex systems and complex equipment during development, integration, delivery and operation. Microsystems and control components: Microsystems mainly include products such as on-chip microprocessors, memories, etc. Control components mainly include attitude and trajectory control liquid power systems, optical inertial combined navigation devices, attitude sensors, microprocessors, space electromechanics, etc.

During the reporting period, the company's smart equipment industrial base for satellite applications in Shunyi Aerospace Industrial Park was initially ready for use. The company further expanded new market areas, obtained contract orders from many companies, and continued to increase its market share in the commercial space market.

③ Nuclear I industry and special environment automation equipment business: Achieved revenue in 2023 (544 million yuan, +3.11%), accounting for 38.66% of revenue (16.29%, -2.22pcts). The business is mainly managed by subsidiaries Xuanyu Intelligence and Hangzhou Xuanyu. Xuanyu Smart's 2023 net profit rate (7.48%, -0.19pcts) is basically stable. The main products include: intelligent equipment systems used in special environments, special needs, and the “three special” fields of special industries. Remote operating device: Special electromechanical- integrated key equipment for process operation in special environments.

From the perspective of industry development needs, according to data released by China National Railway Group Corporation, in 2023, the national railway completed fixed asset investment of 764.5 billion yuan, an increase of 7.5% over the previous year, and put into operation 3,637 kilometers of new lines, including 2,776 kilometers of high-speed rail. The work target of China National Railway Group Corporation in 2024 clearly states that it will put into operation more than 1,000 kilometers of new lines; complete total transportation revenue of 1 trillion yuan, an increase of 35.9 billion yuan over the previous year, an increase of 3.7%. The company's railway safety inspection and maintenance business is expected to maintain steady growth.

At the same time, the “Blue Book on China's Aerospace Science and Technology Activities” revealed that in 2024, China Aerospace is expected to implement about 100 times throughout the year (the year-on-year growth rate is close to 50%), and multiple satellite constellations will accelerate networking construction, demonstrating the certainty of industry growth throughout the year. Of these 100 or so launch missions, the Aerospace Science and Technology Group plans to arrange nearly 70 launches, launch more than 290 spacecraft, and carry out a series of major engineering missions. Furthermore, the Central Economic Work Conference in December 2023 focused on building a number of strategic emerging industries in 2024, such as biomantry, commercial aerospace, and low-altitude economy. Along with the rapid development of the traditional aerospace industry and commercial aerospace, market demand for localized high-reliability, high-performance, miniaturized, and long-life SoC and SIP products increased simultaneously, and the company's downstream demand growth was definitely strong.

Improve operating cash flow and accelerate stocking to meet downstream demand

In terms of expenses, the company's three-fee rate (8.67%, +1.17pcts) increased in 2023. Among them, the sales expense ratio (2.64%, +0.2pcts), management fee ratio (5.31%, +0.57pcts), and financial expenses rate (0.72%, +0.39pcts) all increased slightly. The company's R&D expenses (83.9598 million yuan, -3.19%) have declined but remained at a high level, and the number of R&D personnel (133 people, +3.91%) has also been rising steadily. Judging from the company's R&D projects, it focuses on infrared axis temperature detection fault image intelligent recognition, new power drivers, aerospace high-performance processor chips, test technology research, etc., which are highly compatible with the company's main business, and are expected to become the core driving force for the company's revenue expansion and continued rapid growth in performance.

In terms of cash flow, in 2023, the company's net cash flow from operating activities (59 million yuan, a year-on-year increase of 159 million yuan) was mainly due to the company's net operating cash flow through cash management and rational planning; net cash flow from investment activities (-109 million yuan, a year-on-year decrease of 84 million yuan), mainly due to the subsidiary Xuanyu Space speeding up the construction of the Shunyi Industrial Park, infrastructure projects, and the fixed asset procurement expenses of the engineering center; net cash flow from financing activities (0.15 million yuan, a year-on-year decrease of 171 million yuan), mainly due to the cash flow from financing activities to obtain loans. Cash outflows are due to loan repayments and dividend payments.

In terms of other financial data, at the end of 2023, the company's inventory (1,575 billion yuan, -7.18%) declined, but it was still high. Among them, inventory products (133 million yuan, +46.34%) grew rapidly, and raw materials (33 million yuan, +225.44%) increased significantly. In addition, the company expects a rapid increase in related transactions in 2024 (1,974 million yuan, an increase of 317 million yuan over the actual amount incurred in 2023). Based on the company's sales and production model, we judge that the company currently has sufficient orders and is actively preparing for production. Some of the inventory is expected to be fulfilled until the profit statement is completed. The fund-raising project is expected to reach a usable state by the end of 2024. After three years of development after the restructuring, the company has developed into a competitive growth enterprise in the field of intelligent equipment. The company completed the company name change in May 2023, from “Kangtuo Infrared” to “Aerospace Smart Equipment”.

The company announced in December 2023 that the fund-raising projects “Shunyi Aerospace Industrial Park Satellite Application Intelligent Equipment Industrial Base Project” and the “Special Robot R&D and Capacity Building Project” are expected to reach a usable state until December 31, 2024. As of December 22, 2023, the total investment in the project was 583 million yuan. We believe that once the project is completed, it will provide a solid foundation for continuous and steady revenue growth in the aerospace and nuclear industry, and is also expected to further enhance the company's core competitiveness in the medium to long term.

On the other hand, in April 2024, China Aerospace Science and Technology Group Co., Ltd. held a special promotion meeting on improving the quality of listed holding companies. In January 2024, the State Council's State-owned Assets Administration Commission also clearly proposed that it will comprehensively implement market value management assessments for listed companies. The above policies and measures will all help the company improve quality and efficiency and promote high-quality development.

Investment advice

The company belongs to the Fifth Academy of Aerospace Science and Technology of China. It focuses on the field of intelligent equipment, leveraging the advantages of aerospace technology, professional foundation and system engineering experience, and focusing on the three strategic industries of rail transit, aerospace, and nuclear industries. The specific investment suggestions are as follows: 1. In 2023, the company's revenue and net profit to mother achieved steady growth, and gross margin and net interest rate stabilized. Combined with downstream demand, the company's three major business segments are expected to maintain a steady growth trend.

2. Along with the rapid development of the traditional aerospace industry and commercial aerospace, and relying on the shareholder advantages of the Aerospace Science and Technology Group, the company's downstream demand growth in the aerospace field is determined to be strong. At the same time, the company's smart satellite application equipment industrial base in Shunyi Aerospace Industrial Park is expected to further expand production capacity, reduce costs and increase efficiency, and enhance profitability; 3. The company responds positively to the “One Belt and One Road” strategy, and the overseas market for railway vehicles is expected to gradually expand; 4. As a listed platform under the Fifth Academy of Aerospace Science and Technology, the company is expected to work to improve the quality of listed companies in the Aerospace Science and Technology Group Under the influence of events such as the promotion of the topic and the clear and comprehensive implementation of market value management assessments of listed companies by the State Council's State-owned Assets Administration Commission, more emphasis is placed on improving quality and efficiency, and vigorously promoting high-quality development. Based on the above views, we expect the company's operating income in 2024 to 2026 to be 1,612 billion yuan, 1,867 billion yuan, and 2.173 billion yuan, respectively, and net profit to mother of 105 million yuan, 123 million yuan and 145 million yuan respectively. We maintain the “buy” rating. The target price is 14.60 yuan, corresponding to PE in 2024 to 2026, 99 times, 85 times and 72 times, respectively.

Risk warning

Overseas market promotion fell short of expectations; construction of fund-raising projects fell short of expectations; space product technology research and development cycles were long; competition in the market where the products were located intensified, and profitability declined.