Description of the event
The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 6.272 billion yuan, up 1.98% year on year and 64.01% month on month; net profit to mother of 155 million, up 76.04% year on year and decrease 60.35% month on month; net profit without return to mother was 106 million, up 444.82% year on year and 71.57% month on month.
Incident comments
The company's 24Q1 gross sales margin remained stable, and the increase in performance was significantly higher than the increase in revenue, demonstrating profit resilience. The gross margin of 24Q1 sales was 11.64%, down 0.34 pcts year on year, and up 0.56 pcts month on month. Looking at the first quarter compared to the first quarter, the gross margin of 23Q1 remained stable after rebounding year on year 22Q1. Based on Wright's law and bathtub curve, a gradual increase in product maturity is expected to drive the company's profitability back up. The 24Q1 company's expense ratio was 9.36%, down 1.64 pcts year on year and up 4.49 pcts month on month; net sales margin was 2.96%, up 1.21 pcts year on year and 0.64 pcts month on month. Among them, the sales expense ratio was 2.02%, down 0.13 pcts year on year, up 1.42 pcts month on month; management expense ratio was 5.69%, down 1.29 pcts year on year, up 2.94 pcts month on month; R&D expense ratio was 0.72%, down 0.39 pcts year on year, down 0.14 pcts month on month; financial cost ratio was 0.94%, up 0.17 pcts year on year, up 0.28 pcts month on month. The reduction in the cost rate during the period reflects a possible improvement in the level of corporate governance.
The marginal impact of tax reform policies on the company's performance has weakened, and the focus of capital expenditure on high value-added areas is expected to drive the company's asset efficiency to continue to improve. 23Q1 corporate taxes and surcharges increased sharply to 122 million yuan, reflecting that the increase in circulation tax led to an increase in surcharges due to the relevant national tax reform policy, while the 24Q1 corporate tax and surcharges fell by 75 million yuan year-on-year. We believe that after the implementation of the tax reform policy, the company's centralized tax payment in 23Q1 led to a sharp increase in taxes and surcharges, and the impact of the 24-year tax reform policy on the company's performance is expected to weaken. The company's capital expenditure or focus on high value-added aspects such as machine assembly, component assembly and maintenance. The return on investment increased year by year from 0.16% in 21Q1 to 0.44% in 24Q1, while ROE (weighted) increased year by year from 0.1% in 21Q1 to 0.39% in 24Q1, and ROA increased year by year from 0.07% in 21Q1 to 0.18% in 24Q1.
The phased digestion of the company's contract liabilities reflects smooth downstream delivery, continued high capital expenditure to expand production capacity, and the company's supply capacity is expected to increase as the downstream demand boom unleashes. The company's 24Q1 contract debt balance at the end of the 24Q1 period was 10.726 billion yuan, which maintained a high position against the backdrop of an accelerated pace of delivery or reflected the continued release of downstream demand. At the end of the 24Q1 period, the company's construction amount was 2,783 billion yuan, an increase of 15.12% over the previous year. Continued capital investment helped improve the company's core delivery capacity. The 23 annual report revealed the company's 20 important projects under construction. Among them, equipment capacity building for the company headquarters, construction of development conditions for Liming Company, test bench equipment, and aircraft engine repair capacity building are nearing completion, and it is expected that the company's overall delivery capacity will be enhanced after the transformation.
Profit forecast and valuation: The company is expected to achieve net profit of 17.2/21.8/2.80 billion yuan in 2024-2026, with a year-on-year growth rate of 21%/27%/28%, corresponding PE of 58/46/36X.
Risk warning
1. There is a risk that the company's gross margin will continue to decline due to the production and finalization of new aero engine models and the beginning of mass delivery; 2. The Aviation Development Group is leading the uncertain progress of the “small core, big collaboration” organizational structure change in the aero engine industry.