Incident: The company released its 2024 mid-year report. 2024H1 revenue was 2.547 billion yuan, +5.58% year over year; net profit to mother was 0.604 billion yuan, +9.47% year over year; net profit after deducting non-return to mother was 0.594 billion yuan, +9.84% year over year. Looking at a single quarter, 2024Q2's revenue was 1.23 billion yuan, +5.97% YoY, -6.65%; net profit to mother was 0.253 billion yuan, +16.44% YoY, -28.05% month-on-month; net profit without return to mother was 0.243 billion yuan, +12.99% YoY and -30.68% YoY.

Profit table: 2024H1 China Aviation Composites revenue of 2.401 billion yuan, +3.82% year on year, net profit of 0.618 billion yuan, +6.04% year over year, mainly due to steady growth in demand for downstream military aircraft; Premium Bermuda benefited from increased domestic and foreign market orders. 2024H1 revenue was 0.117 billion yuan, +105.68% year over year, net profit 0.015 billion yuan, +0.018 billion yuan year on year; aviation advanced manufacturing technology industrialization business (including high-end intelligence) (Equipment) Currently in the reform and transformation period, 2024H1's revenue was 0.016 billion yuan, or -37.59% year over year, net profit -0.012 billion yuan, a year-on-year loss of 0.3353 million yuan. In terms of profitability, 2024H1's gross profit margin was 37.25%, -0.43pct year on year, and the net profit margin was 23.98%, +1.20pct year on year. The increase in net interest rate was mainly due to the 2024H1 management expense ratio and R&D expense ratio falling 1.09 pct and 0.33 pct year on year, respectively.

Balance sheet: 2024H1 prepayments were $0.039 billion, up 133.85% from the beginning of the year, and notes payable and accounts payable were $1.926 billion, up 81.97% from the beginning of the year. Prepayments, notes payable, and accounts payable all increased compared to the beginning of the year, indicating that the company increased procurement of raw materials in order to cope with the increase in downstream demand.

The company continues to achieve new product breakthroughs and strengthen its industrial layout. In terms of new product breakthroughs, first, the company participated in research on a number of important topics to promote key technological breakthroughs in the fields of pre-impregnation, honeycomb, civil aircraft composite structural components, and non-aviation products; second, new composites such as T800 grade carbon fiber pre-impregnation continued to expand product variety and scale, and 24H1 achieved significant revenue growth; third, the company broke through key technologies for domestic high-performance carbon fiber pre-impregnation preparation, successfully completed delivery and achieved small-batch delivery capabilities. In terms of industrial layout, first, the company and China Aviation Development Corporation formed a joint venture for commercial engine composites, and the joint venture has now begun operation; second, the company made full use of the composite industry's foundation and technical accumulation to begin demonstrating business development plans for general aviation composites and structural components represented by low altitude and drones, to develop new quality productivity.

Investment advice: As a core card company in the domestic aviation carbon fiber pre-impregnation field, the company is expected to achieve long-term steady growth in the future as the penetration rate of carbon fiber composites is stabilized in military aircraft. At the same time, new demands such as civil aircraft, commercial aviation, rail transit, and low-altitude economy will further open up room for long-term growth.

The company's net profit for 2024-2026 is estimated to be 1.14, 1.282, and 1.381 billion yuan, respectively. The corresponding valuations are 23X, 20X, and 19X, respectively, maintaining a “buy” rating.

Risk warning: New product development, downstream demand falls short of expectations, product prices fluctuate.