Description of the event

China Aviation Hi-Tech has released its 2024 mid-year report. In the first half of 2024, the company's revenue was 2.547 billion yuan, up 5.58% year on year; net profit to mother was 0.604 billion yuan, up 9.47% year on year; net profit after deduction was 0.594 billion yuan, up 9.84% year on year; total liabilities were 2.62 billion yuan, up 6.28% year on year; monetary capital was 1.751 billion yuan, up 0.75% year on year; accounts receivable were 3.716 billion yuan, up year on year 30.27%; inventory was 1.09 billion yuan, a year-on-year decrease of 2.23%.

Incident reviews

The new aviation materials business has maintained steady growth, and profitability continues to improve. The subsidiary Aviation Industry Composite achieved revenue of 2.401 billion yuan in the first half of 2024, an increase of 3.82% year on year, and achieved net profit of 0.618 billion yuan, an increase of 6.04% year on year. The subsidiary Youcai Bermuda achieved revenue of 0.117 billion yuan in the first half of 2024, an increase of 105.68% year on year, and realized net profit of 14.5038 million yuan, an increase of 17.9438 million yuan over the previous year. In the first half of 2024, the company's net interest rate increased 1.2 percentage points year-on-year to 23.98%, and profitability continued to increase.

Focus on new aviation materials and seize opportunities for the development of aviation equipment across generations. Aeronautical composites have entered a mature application period. Aviation industry composites is currently the only unit specializing in composite material research and development engineering in China. It is in a leading position in the country in terms of composite material development and transformation of achievements, and undertakes many development and research tasks such as civil aircraft and commercial aero engines. As demand for military and civil aerospace equipment increases, the company is expected to continue to benefit from the boom in the new aviation materials industry.

Investment advice

We expect the company's 2024-2026 EPS to be 0.86\ 1.02\ 1.23, respectively, corresponding to the company's closing price of 18.50 yuan on August 23, and PE of 21.6\ 18.1\ 15.0 for 2024-2026, respectively, maintaining the “sharehold-A” rating.

Risk warning

The installation of new equipment fell short of expectations; C919 production fell short of expectations; product delivery fell short of expectations.