Event: The company announced on April 30 that the company's revenue in 2023 (456 million yuan, +13.65%), net profit to mother (134 million yuan, +9.63%), net profit after deducting non-return net profit (98 million yuan, -14.47%), gross profit margin (51.19%, -8.47pcts), net profit margin (30.30%, -1.65pcts).
The company's revenue for the first quarter of 2024 (43.6056 million yuan, +71.79%), net profit due to mother (4,05529 million yuan, -27.27%), net profit after deducting non-return net profit (-210.07 million yuan, year-on-year decrease of 1.8064 million yuan), gross profit margin (35.97%, -23.38 pcts), net profit margin (10.33%, -10.51 pcts).
Revenue and net profit to mother grew rapidly, and gross margin declined due to changes in product structure and customer price cuts. The company's revenue (456 million yuan, +13.65%) grew rapidly in 2023. Specifically, it was mainly due to rapid growth in aerospace and communications product revenue (286 million yuan, +34.06%). Net profit attributable to mother ($134 million, +9.63%) increased steadily, net profit not attributable to mother (0.98 million yuan, -14.47%) declined, and gross profit margin (51.19%, -8.47pcts) declined, mainly due to changes in product structure, downstream hosts or overall customer price reductions. The net profit ratio (30.30%, -1.65pcts) declined lower than the gross profit margin, mainly due to a decrease in the company's expenses ratio (20.79%, -2.12pcts) and a year-on-year increase in investment income (9.225 million yuan). 9.7984 million yuan) was due to a sharp increase in other revenue (265.683 million yuan, a year-on-year increase of 17.5045 million yuan).
The company's revenue in the first quarter of 2024 (43.6056 million yuan, +71.79%) grew rapidly, mainly due to an increase in aviation process equipment revenue; the decline in gross profit margin (35.97%, -23.38 pcts) was due to changes in product prices and structure; net profit to mother (4,05529 million yuan, -27.27%) declined, and the decline in net profit ratio (10.33%, -10.51 pcts) was lower than gross profit margin, mainly due to a significant decrease in the cost ratio (43.56%, -19.71 pcts) for the period.
The aerospace and communications industry business is growing rapidly. The main business of the aerospace industry is focused on the R&D and manufacture of aerospace products, aerospace process equipment, aviation products and satellite communication and measurement and control testing equipment in the aerospace field. It mainly provides technical solutions and supporting services for product manufacturing for scientific research institutes and overall units in the aerospace field. The company's customers include Aerospace Science and Technology, China Telecom, Aerospace Science and Engineering, the Chinese Academy of Sciences, the aviation industry, COMAC, China Aviation Development, etc.
① Aerospace and communications products: Revenue grew rapidly in 2023 (286 million yuan, +34.06%), accounting for 36.92% of revenue, and declining gross profit margin (56.13%, -8.56pcts).
The aerospace sector business mainly includes undertaking tasks such as process technology research, precision manufacturing, assembly, testing, and environmental testing of core components such as space-borne microwave antennas, microwave devices, mechanical structures, thermal control, star structures, and solar wings. Products in the satellite communication and measurement and control testing equipment segment mainly include three categories: satellite communication antennas, terrestrial measurement and control antennas, and special test equipment.
During the reporting period, the company completed process technology research, production and delivery of various aerospace products such as terahertz high gain antennas, space-based antennas, slot array antennas, and star structures; projects such as ultra-wideband vehicle detection antennas, container measurement and control digital transmission antennas, commercial low-orbit satellite internet measurement, control and feed antennas, and large-scale compact field reflective surfaces were successfully developed and delivered. The company developed and integrated research and development of lightweight folding reflective surface technology, ultra-wideband feeder array design technology, “dynamic mid-measurement” tracking and control technology, and mobile measurement, transportation and control stations Breakthroughs have been achieved, and the product spectrum has been further enriched; several high-precision compact field reflective surface projects have been successful Delivered and put into use.
② Aerospace process equipment: Revenue in 2023 (125 million yuan, +6.05%) grew steadily, accounting for 16.17% of revenue, and declining gross profit margin (42.69%, -13.47pcts).
The products mainly include the development, maintenance and service of metal and composite parts molding process equipment, assembly frames, automated production lines for composite parts, assembly lines for parts and machines, and non-standard equipment.
During the reporting period, the company completed products such as the C919 automatic positioning and mobile positioning system, C929 wing wall panel molding tooling, intake jig, assembly frame, and various aircraft and drone fuselage structural molding tooling.
Furthermore, the company announced in April 2024 that its subsidiary Hunan Feiyu won the bid for the “Shanghai Aircraft Manufacturing Co., Ltd. C929 Project Composite Tooling Framework Agreement Project”, with a transaction amount of no more than 175 million yuan (about 38.36% of total revenue in 2023).
③ Aviation products: 2023 revenue (45 million yuan, -33.70%), accounting for 5.82% of revenue, gross profit margin (43.50%, -6.46pcts) decreased.
The products mainly include composite structural parts, composite functional parts, and metal parts.
During the reporting period, the company's multi-type drone composite fuselage, wings, air intake, etc. completed molding manufacturing technology research and process assessment, and gradually moved to the mass production and delivery stage.
Overall, the aerospace circuit where the company is located is in a booming stage of development. In terms of the aerospace industry, the “Blue Book on China's Aerospace Science and Technology Activities” reveals that in 2024, China Aerospace is expected to be implemented about 100 times throughout the year (the year-on-year growth rate is close to 50%). Multiple satellite constellations will accelerate networking construction, demonstrating the certainty of industry growth throughout the year. In terms of the aviation industry, China's low-altitude economy is still in the early stages of rapid industrial development, and is expected to usher in rapid development in aircraft manufacturing and infrastructure; at the same time, with the orderly opening of airspace and the implementation of more exemplary scenarios, the low-altitude economy will increasingly enter public life, bringing new momentum to economic development. In December 2023, the Central Economic Work Conference 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, commercial aerospace, and low-altitude economy, the company closely follows national policy guidelines and actively expands product applications and business segments, which is expected to create new profit growth points.
The amount of related sales is expected to increase dramatically, highlighting that the company's three-fee rate (10.25%, -1.41pcts) declined in 2023. Specifically, the sales expense ratio (2.43%, -0.20pcts), management fee ratio (8.07% 6, -0.77pcts), and financial expense ratio (-0.26%, -0.45pcts) have all declined. Among them, the decline in the financial expense ratio is mainly due to an increase in interest income on deposits. The company's R&D expenses (48 million yuan, +6.55%) are rising steadily, and the number of R&D personnel (148 people, +33.33%) is growing rapidly. By the end of 2023, the company was developing 27 projects, mainly focusing on research directions such as drone wing structures, composite wall panel molding, civil aircraft structural process equipment, mobile measurement and control digital transmission antennas, and vehicle-mounted automatic folding and detection antennas. They 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 ($39 million, -62.97%) decreased significantly, mainly due to the increase of 83.77% in cash from purchasing goods and receiving labor payments over the same period of the previous year, due to increased communication products and aerospace process equipment tasks with high material costs, increased prepaid material payments and inventory, and increased purchasing-side capital expenditure; net cash flow from investment activities (-773 million yuan, a year-on-year decrease of 620 million yuan) was drastically reduced, mainly due to the company's use of idle raised capital to purchase structured deposits; financing activities Net cash flow ($849 million, +887.68%) increased significantly, mainly due to the receipt of capital raised from the public offering of shares.
In terms of other financial data, at the end of 2023, the company's inventory (127 million yuan, +48.39%) grew rapidly, with raw materials (48 million yuan, +106.06%) growing rapidly; accounts receivable (315 million yuan, +61.83%) grew rapidly. In addition, the company expects to sign a new contract amount of 135 million yuan for related sales in 2024 (an increase of 173.40% over the actual amount incurred last year). Based on the company's sales and production model, we judge that the company currently has sufficient orders and is actively preparing goods for production.
Actively carry out industrial park construction and focus on expanding production capacity in the main business
The company was listed in the Science and Technology Innovation Edition in June 2023. According to the prospectus, the company plans to invest 600 million yuan in commercialization projects for military and civilian dual-use communications, measurement, control and testing equipment. The project is expected to be ready for use by the end of September 2025. The project products are used in key national projects and high-tech equipment such as satellite communication earth stations, low-orbit internet, emergency communications, large-scale high-precision austerity fields, large-scale radio telescopes, terahertz antennas, etc., and are an important part of the construction of aviation industrial parks.
By the end of 2023, the company's Huanyu Aviation Industrial Park had completed construction of more than 80,000 square meters, and the increase in industrialization capabilities in the satellite communications, measurement and control testing equipment sector and composite material product sector has begun to bear fruit. The industrial park plans industrialization capabilities for satellite communication antennas, measurement and control test antennas, data link products, high-end composite components, and large-scale high-precision test equipment.
During the reporting period, the company completed the groundbreaking of the 132-acre drone industrial park project in Zigong and successfully carried out construction work. It is expected to be partially put into operation in the first half of 2024. The Zigong Aviation Industrial Park mainly builds composite parts manufacturing capabilities, drone components, and complete aircraft assembly and testing capabilities. The subsidiary Zigong Huanyu actively participated in the supporting needs of the drone industry chain and accelerated the construction of aviation product production capacity.
We believe that the company actively carries out industrial park construction around its main business and development strategy. After completion and delivery of the park, it will help expand the production support capacity of the company's aerospace and communications products, drone division f and other products, further improve the industrial chain and product structure, enhance equipment production capacity and product technology level, and further enhance core competitiveness.
Carry out share repurchases and implement “improving quality, increasing efficiency and increasing returns”
The company announced in February 2024 that it plans to use part of the excess capital raised in the IPO to repurchase the company's shares through centralized bidding. The total repurchase capital is not less than 50 million yuan or 100 million yuan. The repurchase price will not exceed RMB 30 yuan/share, and the shares will be repurchased for employee stock ownership or equity incentive plans. By the end of April 2024, 2.472,500 shares had been repurchased (0.61% of the total share capital).
The company actively carries out share repurchases, which helps the company to implement the “improve quality, increase efficiency and value return” action plan, maintain the company's stock price stability, and establish a good market image. Subsequent share repurchases are intended to be used to carry out equity incentives, which is conducive to fully mobilizing the enthusiasm of the company's management team and core cadres, effectively binding shareholders' interests, company interests and core team personal interests, and seeking investment suggestions for long-term development
As a high-tech enterprise dedicated to serving the fields of national defense, military industry, aerospace, etc., the company focuses on R&D and manufacturing of aerospace products, aerospace process equipment, aviation products, satellite communications and measurement and control testing equipment. The specific investment suggestions are as follows: 1. In 2023, the company's revenue and net profit to mother grew steadily. Among them, the aerospace and communications business grew rapidly, and the gross margin level of various businesses declined. Judging from the rapid growth in data such as inventory and estimated related sales amounts, the company's business velvet is expected to continue to grow rapidly in 2024 2. The aerospace track where the company is located is in a booming stage of development, and spans many fields with high development and high market attention, such as civil aircraft, low-altitude economy, and commercial aerospace, and is expected to usher in a double attack between industry velvet and Davis, where valuation is rising on both levels.
3. The company focuses on its main business and development strategy to build the Universal Aviation Industrial Park and Zigong Drone Industrial Park, which is conducive to expanding the production and supporting capabilities of the company's aerospace and communications products, drone components, etc., and further enhancing the company's core competitiveness; 4. The company actively carries out share repurchases, which helps the company to better carry out market value management, maintain stable stock prices, and establish a good market image. Subsequent share repurchases are intended to be used to develop equity incentives, which is expected to further motivate the company's management team and core cadres to seek long-term development.
Based on the above views, we expect the company's revenue for 2024-2026 to be 584 million yuan, 761 million yuan and 1,010 million yuan respectively, net profit to mother of 170 million yuan, 220 million yuan and 293 million yuan respectively, and EPS of 0.42 yuan, 0.54 yuan, and 0.72 yuan respectively. We maintain the “buy” rating.
Risk warning
The construction progress of the industrial park fell short of expectations; downstream demand fell short of expectations; production capacity fell short of expectations; and the cost of upstream raw materials fluctuated.