Description of the event

The company released its 2024 semi-annual report. 2024H1 achieved revenue of 21.625 billion yuan, a year-on-year decrease of 6.59%, and achieved net profit of 1.618 billion yuan, an increase of 8.39% over the previous year. On a quarterly basis, 2024Q2 achieved operating income of 12.132 billion yuan, a year-on-year decrease of 13.19%, and achieved net profit to mother of 0.902 billion yuan, an increase of 5.98% year on year.

Incident comments

Affected by the progress of contract signing, the company's 2024H1 revenue declined year-on-year, but downstream model demand determined delivery accelerated, and the annual revenue target is expected to be achieved steadily until subsequent contracts are signed. The company's 2024H1 was affected by the contract signing schedule, and overall revenue for the first half of the year fell 6.59% year on year. However, the company's operations were based on aviation defense equipment models and procurement plans determined by specific users based on national defense strategy requirements, or procurement plans determined by users based on civil aviation market development needs, to coordinate current orders and medium- to long-term plans to formulate annual business plans and three-year rolling plans, and organize product R&D, production, sales, service guarantee and maintenance.

In the context of “production based on sales” of military products, the company optimizes the structural layout and expands development space in a new factory area in the Shenbei New Area to meet the production needs of new models. At the same time, Jihang has grown rapidly as a maintenance platform and will become the driving force for the company's subsequent growth. The company's current factory was built relatively early. There is limited room for expansion of research and production plants and equipment facilities. There is a certain contradiction between the test environment and urban development. It will be difficult to fully meet the needs of scientific research and production tasks in the future. As the technical status of the new models gradually matures, the company built a new factory area in Shenbei New Area with the support of the local government to support mass production of subsequent new models. The company's overall fixed asset balance at the end of the 2024H1 period increased 11.71% to 5.066 billion yuan compared to the beginning of the period.

The company is expected to achieve net profit of 3.864/4.906/6.04 billion yuan in 2024-2026, with year-on-year growth rates of 28.5%, 27.0% and 23.1%, respectively, and PE 29, 23, and 19 times, respectively.

Risk warning

1. Demand is not issued in a timely manner;

2. The risk of production capacity expansion falling short of expectations.