Brief performance review

On August 27, the company released its 24-year report. 1H24 achieved revenue of 1.268 billion yuan, +7.12% year-on-year, and net profit of 0.152 billion yuan to mother, or -5.95% year-on-year. The company achieved revenue of 0.606 billion yuan in 2Q24, +5.08% year-on-year, and realized net profit to mother of 0.061 billion yuan, or -23.33% year-on-year.

Management analysis

The two-aircraft business continued to grow rapidly, with 1H24 revenue +19.65% year-on-year. According to the company's announcement: (1) In the field of gas turbines, the company develops hot-end products for various types of gas turbines such as E/F/H/J grade. The power range covers the main models of 12MW-400MW. Customers cover the world's major gas engine giants, and the product range covers superalloy single crystal, directional and isaxial crystal moving vane, guide vane, ring, etc. (2) In the aero engine business, the company continues to steadily supply core components such as superalloy blades, casings, and bearing seats for the C919 and C929; benefiting from growing demand in overseas aviation markets, the company continues to produce LAEP series engine cases at full capacity. The cooperative relationship with G and S companies is closer, and the order scale is further expanded.

A breakthrough has been achieved in the number of nuclear power approval groups, and we are optimistic about the long-term growth of the company's nuclear energy and nuclear power business. According to the company's announcement, in '22 and '23, the National Standing Committee approved 10 nuclear power units; in August '24, the National Standing Committee approved 11 nuclear power units, which is optimistic about the long-term release of future demand for nuclear power equipment and nuclear energy materials. (1) In the field of nuclear electric casting, 1H24 focused on completing the delivery of spray pump bodies for a small reactor technology demonstration project, primary nuclear motor supports, and blasting valves for a project. (2) In the field of new materials for nuclear energy, the upper and lower shells of the Dewar project of the Chinese Academy of Sciences undertaken by the company were successfully combined at the Science Island site. 1H24 achieved revenue of 0.214 billion yuan in new nuclear materials and components, +18.39% over the same period last year.

It is expected to actively lay out low-altitude economy businesses and achieve long-term growth with policy support. According to the “Implementation Plan for Innovative Application of General Aviation Equipment (2024-2030)”, China's general aviation equipment will form a trillion dollar market by 2030. According to the company announcement, 1H24 cooperated with relevant units to research and organize the implementation of a mapping test plan for the YLWZ-190 engine using ammonia fuel; completed the assembly and test run of the YLWZ-300 engine, delivered to a certain unit to complete the joint adjustment with the power generation system, and the engine ran smoothly; a model successfully competed for the hybrid package project, and is making every effort to support and deliver subsequent orders. The company's low-altitude economy business layout is early, benefiting from policy support, and is expected to achieve long-term growth in the future.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue in 2024-2026 to be 2.764/3.265/3.865 billion yuan, net profit to mother 0.39/0.468/0.58 billion yuan, corresponding PE is 18/15/12X, maintaining a “buy” rating.

Risk warning

RMB exchange rate fluctuation; raw material price fluctuation; downstream demand falls short of expectations; promotion of low-altitude application scenarios falls short of expectations