Incident: The company released its 2024 semi-annual report, and achieved operating income of 18.548 billion yuan in the first half of the year, an increase of 4.35% over the previous year; net profit to mother of 0.595 billion yuan, a year-on-year decrease of 17.99%.

Affected by investment income, revenue growth was poor, but revenue grew steadily by 2024H1. The company achieved operating income of 18.548 billion yuan (+4.35%) and net profit of 0.595 billion yuan (-17.99%), mainly investment income of -0.242 billion yuan year over year; net profit after deducting non-attributable assets was 0.546 billion yuan (-0.97%), mainly 23H1 non-current asset disposal profit and loss of 0.217 billion yuan, while 24H1 0.002 billion yuan. The company's main business revenue was 18.264 billion yuan (+4.27%), of which aero engines and derivatives achieved revenue of 17.16 billion yuan (+4.02%), foreign trade export subcontracting business achieved revenue of 1.004 billion yuan (+11.02%), and non-aviation products and other businesses achieved revenue of 0.1 billion yuan (-11.87%). Looking at a single quarter, 24Q2 achieved revenue of 12.276 billion yuan, +5.60% YoY +95.71%; net profit to mother was 0.44 billion yuan, or -30.97% YoY +184.06%.

Looking at subsidiary companies, 1) Liming Company: 24H1 revenue was 11.755 billion yuan (+4.98%), total profit was 0.376 billion yuan (+5.55%), and the main model maintained steady growth; 2) Southern Company: 24H1 revenue was 2.114 billion yuan (-16.80%), total profit 0.043 billion yuan (-72.11%); 3) Liyang Power: 24H1 revenue was 1.38 billion yuan (+3.01%), profit The total amount is 0.043 billion yuan (+317.56%), or marks the inflection point of Liyang's performance; 4) Western Airlines (parent company): 24H1 revenue was 7.231 billion yuan (+17.15%), and total profit was 0.479 billion yuan (-2.58%).

The company expects to achieve revenue of 49.762 billion yuan in 2024 (up 13.78% from the actual value in 23), including revenue from aero engines and derivatives of 46.482 billion yuan (+13.67%), foreign trade export subcontracting of 2.079 billion yuan (+6.72%), non-aviation products and other businesses 0.633 billion yuan (+141.38%); estimated net profit to mother of 1.512 billion yuan (+6.40%).

Continuously optimize operating efficiency and maintain stable profitability

In terms of profitability, the company's gross sales margin in the first half of the year was 11.27% (-0.63pct), and the net profit margin was 3.56% (-0.81pct), and the period expense ratio was 7.11% (-0.19pct), of which the sales/management/ R&D expenses ratio was 1.55% (+0.15pct)/3.75% (-0.46pct)/1.01% (-0.39pct), respectively. The company's profitability remained stable, and the operating efficiency continued to be optimized. Among them, in the first half of the year, the company and its subsidiaries applied for 213 invention patents; 154 were authorized, including 152 invention patents.

In addition, at the end of 2024H1, the company's accounts receivable were 28.447 billion yuan, up 35.86% from the beginning of the period, mainly due to increased product sales in the current period and unrecovered payment for some products; inventory was 36.225 billion yuan, up 22.12% from the beginning of the period, mainly due to increased orders and increased product input; and contract liabilities were 7.217 billion yuan, a decrease of 39.23% from the beginning of the period, mainly due to product delivery confirmation revenue.

It can be seen from this that the company continues to actively prepare goods and prepare production to guarantee the completion of tasks throughout the year.

Profit forecast: The company is mainly engaged in aero engine and derivatives business, foreign trade export subcontracting business, non-aviation products and other businesses. The aviation industry chain continues to recover, and the performance is expected to continue to grow. The company's net profit from 2024 to 2026 is estimated to be 1.685 billion yuan, 1.997 billion yuan, and 2.315 billion yuan, respectively, with corresponding EPS of 0.63, 0.75, and 0.87 yuan, and corresponding PE of 56.17, 47.38, and 40.88 times, maintaining the “recommended” rating.

Risk warning: macroeconomic development risk, production and operation risk, defense budget falling short of expectations.