Event: Company discloses results for 2023 and the first quarter of 2024

Many indicators on the reporting side are improving. Collaborative development companies at home and abroad are booming, and the company achieved revenue of 2.104 billion yuan, +44.69% year over year; net profit to mother was 186 million yuan, +1.21% year over year; net profit after deducting non-return to mother was 159 million yuan, -5.65% year over year. During the 2024Q1 period, the company achieved revenue of 578 million yuan, +3.21% year on year; net profit to mother of 60 million yuan, +10.36% year over year; net profit after deducting non-return to mother of 50 million yuan, +5.39% year on year. We believe that, benefiting from the booming aviation equipment and gas turbine markets at home and abroad, the company's performance continues to grow, the company has shown a steady development trend, and the prospects are positive.

On the balance and liability side, the company's notes and accounts receivable for the full year of 23 million yuan, +38% year over year; 24Q1 year-end notes and accounts receivable of $1,209 million, +24% year over year. We believe that the sharp increase in indicators reflects strong downstream demand during the period and the continuous development of the company's main business. On the profit side, 23 achieved gross sales margin of 27.18%, year-on-year -4.91 pct; net sales margin of 8.76%, year-on-year -3.85pct; 24Q1 achieved gross sales margin of 26.25%, year-on-year -3.28pct; and net sales margin of 9.66%, +0.63pct year over year. We believe that the company's profit growth slowed in the short term, mainly due to factors such as inventory removal and cost reduction from downstream customers compounding the impact of the company's share payments, and the net interest rate climbed in the first quarter.

The in-depth layout of the industrial chain continues to advance. The company is expected to maintain steady growth for 24 years. The company will continue to promote the vertical layout of the industrial chain, increasing the capital of its subsidiaries Delan Aerospace and Guizhou Juhang by 682.5/3.06 million yuan respectively during the 23-year reporting period. Delan Aerospace's revenue for 23 years was 330 million yuan, +725% year over year; net profit turned loss into profit to reach 3.101 million yuan, a net increase of 20.055 million yuan over the same period last year. Guizhou Juhang is developing steadily in the surface treatment business, and the joint venture Huai'an Zhihe continues to lay out the digital factory sector. Together, the two help the company develop further into the industrial chain. The company's IPO fundraising project “Special Alloy Ring Rolling Forgings Precision Manufacturing Industrial Park Construction Project for Aero Engines and Gas Turbines” was fully put into operation in early 2023, and the production capacity of the project reached the company's expectations at the end of the period. We believe that the company has a deep vertical layout of the industrial chain business, actively enhances the company's competitiveness in the industrial chain, and that the company's performance transformation can be expected.

Domestic and overseas markets “fly together”, and the multi-field layout resonates positively 23. Throughout the year, the company continued to adhere to the “two wings fly together” market strategy in the domestic and international aviation markets, focusing on customer needs, continuously digging deeper into the potential business of existing customers, and strengthening the development of new customers. Domestically, the company explores new customers and projects in existing business fields such as aviation, aerospace, and gas turbines, while actively exploring new business fields such as underwater, nuclear power, petroleum, chemicals, and hydrogen energy. Overseas, the company continues to improve product development capabilities, strengthen process technology improvements, and vigorously build digital factories to guarantee diversification of overseas business. We believe that, benefiting from the strong recovery of the overseas shipping market, the company has renewed/signed many new long-term agreements with original overseas customers. From an order perspective, as of the end of '23, the total number of orders on hand by the company in the short term was 2,603 billion yuan, +28.48% over the same period last year. The long-term order amount of the China Foreign Affairs Association is about 2,265 billion yuan, with a total of about 4.868 billion yuan of on-hand orders. We believe that as domestic demand for leapfrog development of aviation equipment continues to rise and the company's overseas customer business stickiness gradually increases, the company's short, medium and long-term performance is expected to be stable and continuously released.

Profit forecast and rating: In summary, the company is expected to fully benefit from the “14th Five-Year Plan” leapfrog development demand boom, compounded by the steady improvement in demand for “two aircraft”. We judge that the company's short performance is improving in the medium to long term. The company's net profit for 2024-2026 is estimated at RMB 325/4.38/546 million yuan, corresponding to PE of 18.07/13.39/10.75, maintaining a “buy” rating.

Risk warning: the risk of fluctuations in the military goods business, the risk that the development of new models of equipment will not meet expectations, the risk that the progress and profits of the fund-raising project will not meet expectations, the risk that the operating conditions and profitability of the target enterprise will not meet expectations, etc.