Event: The company released its 2024 mid-year report. The first half of 2024 achieved revenue of 2.547 billion yuan, an increase of 5.58% year over year. Net profit to mother reached 0.604 billion yuan, up 9.47% year over year.

Key points of investment

Driven by new aviation materials, revenue increased 5.58% year on year: in the first half of 2024, the company achieved consolidated revenue of 2.547 billion yuan, compared with 2.412 billion yuan in the same period last year, up 5.58% year on year. Among them, the new aviation materials business achieved revenue of 2.518 billion yuan, an increase of 6.12% over the same period last year, up 6.12% year on year, mainly due to the increase in delivery of major pre-impregnation and carbon brake products in the current period. The aviation advanced manufacturing technology industrialization business (including high-end intelligent equipment business) achieved operating income of 15.7349 million yuan, or 0.025 billion yuan in the same period last year, mainly due to a year-on-year decline in sales of general machine tools and special equipment businesses.

Empowering national policies, creating demand for the low-altitude economy: In the first half of 2024, the company responded to the national call to further develop research and development related to the low-altitude economy. The Central Economic Work Conference held in December 2023 proposed building a number of strategic emerging industries such as biomantry, commercial aerospace, and low-altitude economy. The 2024 State Council Government Work Report clearly defined the “low-altitude economy” as a “new growth engine” for the economy to be actively developed in China. The development of the low-altitude economy will provide more application scenarios for composites and create more demand.

Leading technological innovation, cross-generational development of composite materials: In the first half of 2024, the company received 26 new patents and authorized 1 patent. As of the first half of 2024, the total number of valid patents was about 320.

The company seizes the cross-generational development opportunities of aviation equipment and composite materials technology, continues to increase investment in technology research and development, promote the transformation of scientific and technological achievements, and further consolidate its market position and technical advantages. Aviation industry composites have established a complete scientific research and production technology and service system for composites “design-material-manufacturing-testing”. It has strong composite material development capabilities, represents the highest level of aviation high-performance composites in China, and has strong core competitiveness and a stable industry position in the field of aeronautical composites.

Profit forecast and investment rating: The company's performance is in line with expectations. Based on the boom in the military industry during the 14th Five-Year Plan period, and considering the company's central position in the carbon fiber industry chain, we are optimistic about the company's long-term development, but considering that the low-altitude economy is still in the early stages, the company's profit forecast was slightly lowered. The company's net profit to mother for 2024-2026 is 1.135/1.379/1.63 billion yuan, respectively, compared to 1.286/1.567/1.884 billion yuan; the corresponding PE is 23/19/16 times, respectively. Maintain a “buy” rating.

Risk warning: 1) strategic risk; 2) macroeconomic fluctuation risk; 3) industry competition risk; 4) procurement and supply chain management risk.