Incident: Company discloses 2024 quarterly results
Many indicators on the reporting side improved, and R&D collaborated steadily. In the first quarter, the company achieved operating income of 9.493 billion yuan, +3.47% year over year; achieved net profit of 716 million yuan, +11.58% year over year; and realized net profit of 718 million yuan without return to mother, +12.63% year over year. We believe that the company's performance in the first quarter continued to grow, the company showed a steady development trend, and the prospects are positive.
On the balance side, notes and accounts receivable at the end of the period reached $11.669 billion, +172.96% year-on-year; contract assets increased net of $4.457 billion over the end of the previous year. We believe that the sharp increase in indicators shows that downstream demand was very strong in the first quarter, that the company had sufficient product orders and a stable delivery pace, and that the company's main business developed healthily. On the profit side, the company's gross sales margin at the end of the period was 12.09%, +0.77pct year on year, +1.14pct month on month; net sales margin was 7.52%, +0.57pct year on year, and +1.01pct month-on-month. On the cost side, the 24Q1 company's expense ratio was 2.48%, -0.77pct year over year. Among them, the management cost ratio was 1.82%, +0.12pct; the R&D expense ratio was 1.13%, -0.5pct year on year; and the financial expense ratio was -0.48%, -0.34pct year on year. We believe that the increase in profitability and the decrease in expenses indicate that the results of the company's “cost reduction and efficiency” work have been further highlighted.
The company is expected to maintain rapid growth in 24 years, and it is expected that the leading position in the industry will be further stabilized. The company announced the “2023 Annual Shareholders' Meeting Data” on April 20, 2024 to formulate a business plan for the new year. It is expected that sales of main products will continue to grow rapidly in 24 years. Revenue in '24 will reach $51.026 billion, +10.33% YoY; net profit is expected to reach $3,762 billion, +25% YoY. We believe that, benefiting from the growth rate of the company's main business remains high and volume continues to expand, the competitiveness of the company's industrial chain will continue to improve, and the leading position in the industry is expected to be further consolidated.
The vertical layout of “research, manufacturing, and repair” continues to advance, and the future demand for the MRO market is expected. The company disclosed on April 25 that the subsidiary Jihang will increase capital and expand its shares through a public listing at the Beijing Property Exchange, introduced the Beijing China Airlines Phase 1 Aviation Industry Investment Fund and the National Industrial Investment Fund, and signed a “Capital Increase Agreement”. The company is still a shareholder of Jihang Holdings. We believe that this capital increase and stock expansion to include social capital has further strengthened the company's maintenance business capabilities, and the company's integrated “research, manufacturing, and repair” construction has reached a new level. With the leapfrog development of defense equipment in the “14th Five-Year Plan”, demand in the back-end MRO market is fully released, and the company is expected to reap new growth points.
Demand for “14th Five-Year Plan” leapfrog equipment continues to rise. It is expected that the company will benefit from the batch production of new fighter aircraft as China's leading aviation equipment mainframe. Its balanced production overcomes the cross-parallel tests of mass production and scientific research, and its product models cover three- and fourth-generation multi-series fighters/carrier-based aircraft. It is expected that it will fully benefit from the continuous increase in demand for “14th Five-Year Plan” leapfrog weapons and the opportunities for increasing demand for new aviation equipment in the future. The construction of the “Research, Manufacturing and Repair” integrated platform continues to advance, and the medium- to long-term performance is expected to be released steadily. At the same time, the company's “Three Shen Fei” construction is progressing steadily. System construction, the degree of digital intelligence, and maturity of the management system are constantly improving, and the company's profitability is expected to continue to improve.
Profit forecast and rating: In summary, as China's fighter leader, the company is expected to fully benefit from the “14th Five-Year Plan” leapfrog development demand boom, combined with factors such as the continuous consolidation of the company's leading position in the industry and the continuous advancement of the construction of an integrated platform for “research, manufacturing, and repair”. We judge that the company's short performance is improving in the medium to long term. The company implemented the second phase of the equity incentive plan on November 28, 2022, and stable performance can be expected. We forecast the company's 2024-2026 revenue of 564.2/657.3/76.25 billion yuan, net profit to mother of 37.15/45.44/5.632 billion yuan, corresponding PE of 29.50/24.11/19.46x, maintaining the “buy” rating.
Risk warning: the risk of fluctuations in the military business, the risk that the development of new models of equipment will not meet expectations, the risk that the reform of the military pricing mechanism will not advance as expected, the risk that maintenance business construction will fall short of expectations, etc.