Leading precision forging blade enterprise, business scale continues to expand: The company is a leading domestic aero engine precision forging blade enterprise. It is one of the few domestic enterprises with precision forging technology to achieve compressor blade development and mass production and application in mainstream international engines, and is deeply involved in the development of domestic aero engines. The company achieved overall growth in 2019-2023, revenue CAGR reached 20.52%, and the business scale continued to expand. Furthermore, the company released an equity incentive plan in April this year and set clear performance growth targets.

Overseas markets are recovering rapidly, and the domestic demand gap is obvious: the epidemic has had a significant negative impact on the aero engine market, but the market has shown an upward trend. According to “Commercial Engines 2023,” the top four global aero engine suppliers delivered a total of 2,376 aero engines from June 30, 2022 to June 30, 2023, which has basically returned to the delivery level for the whole of 2019; in the domestic market, the surge in orders for large C919 domestic aircraft and the development of national defense equipment will also benefit the company's aviation Business brings benefits.

Deeply involved in the field of precision forging blades and continuing to expand production capacity: the company carried out technical development of precision forged blades in 2013, and has more than 10 years of R&D and production experience in this field, and its technical level and product standards have been certified by mainstream global engine companies; as of the 2023 annual report, the aero engine key component capacity expansion project has been completed and accepted. After delivery, it will have a total production capacity of 1.6 million compressor blades, and the company has issued a convertible bond issuance plan. The plan shows that the capital raised this time will be used to expand production. The plan shows that the capital raised this time will be used to expand production and construction. Achieve an annual production capacity of 2.5 million blades.

The medical orthopedic business is steady and far-reaching, and gas turbines are awaiting new opportunities: in the medical field, the overall medical orthopedic implant device market is expected to maintain its growth trend due to the intensification of aging and the country's policy support for the medical device field. In terms of gas turbines, thanks to the vigorous promotion of national policies, the installed capacity has grown rapidly. According to the “Gas Turbine Market Outlook”, China's gas turbine market will reach 4.7 billion US dollars by 2033. The company has obtained a business contract (15.99 million yuan) from a well-known domestic gas engine company.

Investment advice: The company's main business has broad prospects, and fund-raising projects open up room for growth. We expect the company to achieve operating income of 744/9.32/1200 billion yuan and net profit to mother of 1.32/173/214 million yuan in 2024-2026. The corresponding PE was 35.97/27.47/22.21 times, respectively. It was covered for the first time, and a “gain” rating was given.

Risk warning: The impact of changes in international subcontracting policies, the risk of the company's restricted shares being lifted, the risk of exchange rate fluctuations, the risk of major shareholders reducing their holdings, and the risk of more financial investors among the original shareholders.