Since its establishment in 2004, Anhui Jialiqi Advanced Composite Materials Technology Co., Ltd. has focused on the R&D and production of aviation composite parts, serving the military aviation sector, and has accumulated rich industry experience and technical advantages, and is a high-quality supplier in the industry.

The operation is steady, and OEM manufacturing is expected to become a new business growth point. The company's revenue increased from 0.235 billion yuan in 2020 to 0.463 billion yuan in 2023, with a compound annual growth rate of 25.37%; net profit to mother increased from 0.054 billion yuan to 0.103 billion yuan, with a compound annual growth rate of 23.54%. Revenue and net profit to mother for the first half of 2024 were 0.2699 billion yuan and 61.55 million yuan, respectively, down 0.28% and 21.64% year-on-year. In terms of business structure, the aircraft composite parts business is the backbone of the company. In recent years, it has accounted for more than 75%, and the gross margin has remained above 30%. In addition, the company's foundry manufacturing business developed rapidly. From 2020 to 2023, the revenue from the manufacturing and technical service business increased from 6.6669 million yuan to 68.5186 million yuan, the business share increased from 2.84% to 14.80%, and the gross margin also increased to 32.76% year by year, which is close to the gross margin level of the aircraft composite parts business.

Demand for downstream military products is growing steadily, and the aviation composite parts business continues to benefit. As defense budgets continue to grow and military modernization advances, demand in the military aviation composite parts market is growing steadily. As an important supplier of composite components for military aviation, the company's downstream customers are mainly aircraft OEMs and research institutes under the aviation industry. The high recognition and strong stickiness of these customers provide the company with a stable source of orders and will benefit from the overall growth in defense demand. Furthermore, with the upgrading of military fighter jets and the development of new models, the company is expected to further expand its market share and achieve continuous business growth.

Entering the civil aviation market is imperative, striving to expand the company's business pillar from unipolar to double wing. Facing the rapid development of the civil aviation market, Jialiqi is actively expanding the field of composite parts for civil aircraft and strives to diversify its business. The mass production of domestic civil aircraft such as the C919 and ARJ21 has provided the company with new market opportunities. The company's layout in the field of civil aviation not only helps to diversify the risks of the single market, but also uses its technical accumulation in the military aviation field to open up new growth points. With the continuous development of the civil aviation industry and the gradual maturity of domestic aircraft, Jialiki is expected to gain a new increase in demand in the civil aviation market.

The expansion of carbon fiber applications has brought more application space to composites. With its excellent properties such as light weight and high strength, carbon fiber materials have shown broad application potential in various fields such as low-altitude economy, new energy vehicles, rail transit, and satellites. The excellent properties of carbon fiber have opened up more application scenarios for composites. As a manufacturer specializing in composite processing, as the scope of application of carbon fiber materials expands, it provides a new market space for the company's composite parts business, and the company will gain new businesses to achieve continuous business innovation and growth.

Profit forecast: We expect the company's revenue for 24-26 to be 5.64, 7.03 and 0.87 billion yuan, respectively, and corresponding net profit to mother of 1.11, 1.34, and 0.16 billion yuan. The corresponding valuations are 39, 33, and 27 times, covered for the first time, and given a “highly recommended” rating.

Risk warning: product technology iteration, increased market competition, high customer concentration, foreign investment in new business falls short of expectations