occurrences
The company announced on April 15 that it will achieve revenue (851 million yuan, +106.25%), net profit to mother (113 million yuan, +347.69%), gross profit margin (46.47%, +6.79pcts), and net profit margin (13.34%, +24.45pcts) in 2023. On April 28, it was announced that 2024Q1 achieved revenue ($97 million, -3.25%), net profit to mother ($0.05 billion, +751.35%), gross profit margin (43.80%, -o.99pcts), and net profit margin (5.44%, +4.80pcts).
Performance exceeded expectations. Revenue, profit and order reserves all reached record highs. The company's operating income in 2023 ($851 million, +106.25%) increased sharply, net profit to mother ($113 million, +347.69%) turned a loss into a profit, and the company's performance improved markedly. Revenue, profit and order reserves all reached record highs, mainly due to factors such as a sharp increase in aviation seat delivery and settlement volume, delivery of major training system equipment projects, and the recovery of the civil aviation industry driving the growth of aviation maintenance business, and continuous improvement in operational efficiency and cost control capabilities. The company's gross profit margin (46.47%, +6.79pcts) gradually returned to the previous level, and the net profit margin (13.34%, +24.45pcts) changed from negative to positive.
In 2023, the company continued to expand its scope of capabilities and expand the scale of its product line. By product: 1) Airborne equipment development accounts for the largest category of the company's business (58.53%, +27.82pcts). Among them, helicopter anti-crash seats account for about 90% of the domestic market share, and revenue (498 million yuan, +293.07%) increased significantly, mainly due to the increase in settlement volume of aviation seat delivery for a key model, the completion of centralized delivery of helicopter simulation training systems, and the aviation kitchen plug-in and other cabin system equipment business continued to grow, with a gross profit margin (54.75%, + 11.65pcts); 2) Aviation maintenance is the company's founding business, achieving revenue (183 million yuan, +22.55%), mainly due to the expansion of the company's civil aviation maintenance market and improvement of internal operation and management capabilities in the general environment of civil aviation industry recovery. Gross profit margin (36.07%, -3.73 pcts), business share (21.51%, -14.69pcts) has declined, and the company's aircraft composite structural parts maintenance capacity building has begun and will become a new business growth point in the future; 3) The measurement, control and support equipment development business is an important core business of the company, achieving revenue (119 million yuan, +9.60%), mainly due to the company's successful product deliveries leading to an increase in performance. Gross profit margin (36.40%, -3.20pcts), business share (13.99%, -12.34pcts); 4) Technical services and other business segments include R&D revenue, aviation materials trade revenue, and aircraft modification services, achieving revenue (51 billion yuan, +82.12%), gross profit margin (26.37%, +2.63pcts), business share (5.96%, -0.79pcts); 5) Smart device development and industrial software R&D businesses are emerging businesses cultivated by the company in recent years. Among them, the smart device development business It mainly targets R&D and production units in the aerospace and defense sector, providing them with intelligent technology solutions in the fields of R&D, manufacturing and equipment support. The products include intelligent tool cabinets, smart roof loaders, intelligent ground mission vehicles, etc.; in terms of industrial software, the company launched SIPDM beyond integrated product R&D management information systems to empower R&D enterprises and create information-based management management for the entire life cycle of scientific research projects. The first customer deployment was completed in 2023. At the same time, new customer expansion and signing were carried out.
The cost control effect was evident, and the cost rate dropped sharply during the period
On the cost side, the company's expenses (243 million yuan, +8.12%) increased during 2023, mainly due to the increase in three fees (177 million yuan, +13.56%), and R&D expenses (67 million yuan, -4.04%) declined slightly. However, the sharp decline in the company's cost rate during the period (28.60%, -25.95pcts) was mainly due to a large drop in the management expenses ratio (16.44%, -14.20pcts). We believe it was mainly due to the expansion of the company's revenue scale, and the scale effect gradually became apparent. In addition, the sales expense ratio (3.98%, -2.60pcts) and financial expense ratio (0.35%, -0.14pcts) also declined slightly, and the decline in R&D expenses ratio (7.84%, -9.01pcts) was mainly due to a decrease in employee remuneration as a share of revenue (4.51%, -6.30pcts).
On the balance and liability side, the company's accounts receivable (754 million yuan, +56.54%) increased dramatically, mainly due to an increase in revenue scale. Contract liabilities ($26 million, +52.03%) increased sharply, inventory ($293 million, +3.37%) increased slightly, including raw materials ($122 million, +24.19%), a decrease in products and inventory (total of $87 million, -22.04%), and an increase in issued products ($72 million, +9.81%). Taken together, it indicates that the company has sufficient orders and is actively preparing and delivering goods. As the delivery of goods is confirmed, it will further boost performance.
On the cash flow side, the company's net cash flow from operating activities in 2023 was 31 million yuan (+219.33%), which changed from negative to positive, mainly due to an increase in cash received from sales of goods and provision of services; net cash flow from investment activities (-0.18 billion yuan, -78.86%) continued to decline, mainly due to increased cash payments for the purchase and construction of fixed assets, intangible assets and other long-term assets; net cash flow from financing activities of 74 million yuan (+1412.26%), a significant increase, mainly due to the increase in cash received and repaid from loans received This is due to a decrease in cash payments due to debt.
Profit increased due to increased receipt of government subsidies in 2024Q1
Revenue ($97 million, -3.25%) and net profit ($0.05 billion, +751.35%) increased sharply in 2024Q1, mainly due to increased government subsidies, gross profit margin (43.80%, -0.99pcts), and net profit margin (5.44%, +4.80pcts), mainly due to an increase in other revenue ($15 million, +83.03%).
Starting with the aviation maintenance business and expanding its business scope with “common technology”, the company always adheres to “aviation as the main business” and can provide R&D, testing and verification, solutions and continuous services for system equipment and component-level products for design, manufacturing, operation and maintenance departments in the aerospace and defense industry. The company has core businesses such as airborne equipment development, aviation maintenance services, measurement and control and support equipment development. In recent years, it has expanded its capabilities to fields such as intelligent equipment research and development and industrial software development. Currently, it is also extending its core technology to the field of low-altitude economy with application advantages in the helicopter field.
In addition, the company is actively expanding its main business capabilities and increasing the production capacity of existing products. In addition to investing in the establishment of Tianjin Aeronautical Technology Company, the company signed an investment agreement with the Tianjin Free Trade Zone Government to build an Andaville Tianjin aviation equipment R&D and production base, taking advantage of the advantages of the aviation industry cluster in the Tianjin Port Free Trade Zone to enhance the company's comprehensive cost competitiveness, comprehensive technical solutions and capabilities.
It is planned to implement a refinancing project to further enhance its core competitiveness. In February 2024, the company issued a fixed increase plan to issue no more than 76.57 million shares (no more than 30% of the company's total share capital before this issuance) to no more than 35 people, raising a total capital of no more than 710 million yuan to build the “Aircraft Airborne Equipment and Aviation Maintenance Industrial Base Project” and the “Ground Support Equipment and Composite Material Development Industrialization Project”.
Among them, the implementing entity of the “Aviation Airborne Equipment and Aviation Maintenance Industry Base Project” is Tianjin Aeronautical Technology Company. The project plans to use the aviation industry cluster in the Tianjin Airport Development Zone to build around the two major business segments of aviation maintenance and airborne equipment to meet future business volume growth, extend and expand the scope of maintenance business to fields such as composite maintenance, and improve operation and management efficiency. The implementing entity of the “Ground Support Equipment and Composites Development and Industrialization Project” is Nestera. Relying on the company's technical accumulation and market resources, the project enhances the production capacity of existing composite structural parts and large-scale ground support equipment, and also promotes the industrialization of new products such as mechatronic products and simulation training systems to further build core competitiveness.
Stock incentives expand the scope of incentives and demonstrate confidence in development
In August 2022, the company issued the 2022 Restricted Stock Incentive Plan (draft), which plans to grant 2,222,000 restricted shares, accounting for 0.88% of the company's total share capital at the time the draft was announced. The incentive plan grants restricted shares at a price of 6.01 yuan/share. The total number of incentive targets is 92 people, covering key technical (business) personnel and middle management personnel. The performance assessment year is the three fiscal years 2023-2025, and the target is that net profit due to mother should not be less than 150 million yuan/180 million yuan/216 million yuan for 2023-2025.
Compared with the equity incentive plan issued in 2021 (later revised in April 2022), this incentive has expanded the scope of incentives, shortened the assessment period by one year, and the assessment indicators are the same. The assessment period for the 2021 restricted stock incentive plan is 2023-2026, and the net profit target for the mother is not less than 150 million yuan/180 million yuan/216 million yuan/259 million yuan.
The company has successively launched equity incentive plans to continuously cover executives and core technical personnel, guide future performance growth, and facilitate the long-term sustainable development of the company.
Demand for airborne equipment is rising, and emerging industries such as the low-altitude economy are driving the aviation maintenance industry to flourish as helicopters and fixed-wing transport aircraft are important models in China's defense and military industry. The fleet size will increase significantly with the large-scale installation and upgrading of weapons and equipment during the “14th Five-Year Plan” period. Aircraft airborne equipment as the core carrier for technological upgrading, especially technological upgrading under autonomous control of core component technology, is an inevitable direction for industry development. The field of airborne equipment manufacturing will also grow with the increase in defense models.
At the same time, with the recovery of China's civil aviation industry, the C919 is officially put into operation, and the layout plans for strategic emerging industries such as commercial aerospace and low-altitude economy, civil aviation will enter a new cycle of development, which will also breed more maintenance needs and promote the development of the aviation maintenance industry.
Investment advice
We think:
l) The company benefits from the “14th Five-Year Plan” military boom development and autonomous and controllable demand, compounded by the recovery of civil aviation, the increase in domestic aircraft manufacturing, and the layout of new fields such as the low-altitude economy; 2) The company continues to increase its efforts to expand new businesses, new markets and new customers, and the layout of refinancing projects will also help the company achieve large-scale production, deepen the company's main business development, further improve the company's product system and further enhance competitiveness; 3) The company has successively launched equity incentive plans to guide future performance growth, and highlight future business development Confidence.
Based on the above view, we expect the company's revenue for 2024-2026 to be 1,039 million yuan, 1,273 billion yuan, and 1,565 billion yuan respectively, with net profit attributable to mother being 180 million yuan, 216 million yuan, and 261 million yuan respectively, and EPS of 0.70 yuan, 0.85 yuan, and 1.02 yuan respectively. Maintaining the “buy” rating, the closing price on May 9, 2024 is 22.33 yuan, corresponding to PE of 2024-2026, 32 times, 26 times, and 22 times, respectively.
Risk warning
Market competition increases risk, risk of customer demand falling short of expectations, risk of loss of high-end talent, etc.