Incidents:

The company released its report for the third quarter of 2024: the company achieved revenue of 3.029 billion yuan in 2024Q1-Q3, an increase of 58.47%; net profit to mother was 0.014 billion yuan, an increase of 59.91% over the previous year.

The company achieved revenue of 1.666 billion yuan in a single quarter of 2024Q3, an increase of 749.73% year on year; net profit to mother was 0.011 billion yuan, an increase of 439.26% year on year.

Comment:

The company achieved significant growth in performance. The company achieved significant increases in revenue and net profit due to the 2024Q3 single quarter, mainly due to the increase in the number of products delivered by the company and the small base for the same period last year.

Changes in the company's supply chain situation in 2023 and the company's improvements and modifications to some of its main products led to delays in delivery of some of the company's main products, resulting in a low level of performance in 23. Looking ahead, the company's performance is expected to maintain rapid growth as a new batch of orders is placed and delivered. According to the company's 2024 mid-year report, the amount of revenue corresponding to the performance obligations that the company has signed a contract with but has not yet performed or has not yet been fulfilled is 4.397 billion yuan, and revenue is expected to be recognized in 2024. From this, it is estimated that the company's revenue for the full year of 2024 was at least 5.76 billion yuan, a year-on-year growth rate of no less than 54.6%.

The gross margin declined slightly, and the expense ratio declined during the period. On the gross profit side, the company's gross margin for 2024Q1-Q3 was 3.05%, -1.59pct year-on-year, a slight decline. On the profit side, the company's net profit margin for 2024Q1-Q3 was 0.47%, +0.004pct year-on-year, and remained stable. On the cost side, the company's 2024Q1-Q3 sales/management/R&D/finance rate was 0.12%/0.80%/1.43%/-0.17%, year-on-year change -0.15/-0.59/-1.08/+0.00pct. The total cost rate for the period was 2.17%, -1.83 pct year on year. Expense control was good during the company period.

Diversified development of trainers, missiles, and drones. Hongdu Airlines has strong competitiveness in the field of trainer aircraft development. It is the only domestic enterprise that also has the ability to develop, manufacture and manufacture a full range of junior, middle, and advanced trainer aircraft products. The company's products are in demand in domestic and foreign markets. In particular, the L15 advanced trainer has good sales prospects in domestic and foreign markets. Overseas revenue for 2022/2023/2024H1 was 0.008/0.204/0.402 billion yuan respectively, and overseas revenue grew rapidly. At the same time, the company is also actively expanding the drone and missile business to achieve diversified development. As one of the two missile research institutes within the Aviation Industry Group, the Hongdu 660 Institute has been undertaking the task of developing airborne missiles in China for a long time.

Investment advice: We expect the company's 2024-2026 revenue to be 5.891/8.969/11.89 billion yuan, net profit to mother of 0.097/0.187/0.284 billion yuan, corresponding EPS 0.14/0.26/0.40 yuan, corresponding PE 258.79/134.18/88.50X, covered for the first time, giving a “buy” rating.

Risk warning: orders fall short of expectations, product delivery delayed, performance and valuation judgments fall short of expectations