Description of the event

Aviation Materials Co., Ltd. released its 2024 interim report. In the first half of 2024, the company's revenue was 1.51 billion yuan, up 14.52% year on year; net profit to mother was 0.311 billion yuan, up 5.16% year on year; net profit after deduction was 0.272 billion yuan, down 8.16% year on year; total liabilities were 1.335 billion yuan, down 15.08% year on year; monetary capital was 3.777 billion yuan, up 334.00% year on year; accounts receivable were 1.733 billion yuan, up year on year 45.32%; inventory was 1.221 billion yuan, a year-on-year decrease of 3.67%.

Incident reviews

Orders have continued to grow steadily, and R&D investment has continued to increase. The company's orders continued to grow steadily in the first half of 2024, and revenue increased 14.52% year over year. In terms of main business, on the basis of fully guaranteeing the development and production of various types of equipment, the company actively connects with customers, actively expands new business growth points, and realizes new product layouts in various fields. Further expand the international aviation equipment market in terms of foreign trade and seek greater market share. The company continues to invest heavily in R&D, continuously accumulate technology and maintain continuous scientific research and innovation capabilities. R&D expenses increased 9.62% year-on-year in the first half of 2024.

The military and civil aviation manufacturing industry remains booming, and the company's performance is expected to continue to benefit. The transformation of China's air force construction into a strategic air force is accelerating, and there is an urgent need for new and upgraded military aircraft. The military aviation market and the aero engine market have entered a period of rapid development, and the demand for aviation materials and products from the defense and military industry will increase accordingly. Furthermore, as the global shipping boom continues to rise and domestic civil aircraft ARJ21 and C919 are mass-produced one after another, civil aviation materials will gradually be domesticated and replacement work will gradually be carried out, and demand for domestic aviation materials will also increase dramatically. The company focuses on the development of aviation and aerospace components and advanced materials. The products are in a leading position in the related aeronautical materials industry. Benefiting from continued strong downstream demand, the company's performance is expected to continue to grow rapidly.

Investment advice

We lowered the company's profit forecast. It is estimated that the company's 2024-2026 EPS will be 1.60\ 2.05\ 2.56, respectively, corresponding to the company's closing price of 48.19 yuan on August 30, and PE of 2024-2026 will be 30.2\ 23.6\ 18.8, respectively, to maintain the “Increased holdings - A” rating.

Risk warning

Raw material prices fluctuate; downstream demand growth falls short of expectations; military review and pricing risks; fund-raising projects fall short of expectations.