受益于行业高景气；发挥“链长”作用带动产业发展。公司致力于建成世界一流的航空发动机企业，是国内，公司是唯一能够研制涡喷、涡扇、涡轴、涡桨、活塞等全谱系特种航空发动机的企业。国际上，公司是能够自主研制航空发动机产品的少数企业之一。2020~2023 年，公司受益于行业高景气，营收规模快速增加，由286 亿元增长至437 亿元，CAGR=15.2%。未来公司将继续立足核心技术，围绕发展新质生产力布局产业链，发挥自身“链长”的拉动作用，提供高质量、高性能、低耗能的航空发动机和燃气轮机产品。Incident: On October 30, the company released its 2024 three-quarter report. From 1 to 3Q24, the company achieved revenue of 25.956 billion yuan, YOY -1.3%; net profit to mother of 0.726 billion yuan, YOY -29.6%; deducted non-net profit of 0.682 billion yuan, YOY -19.6%. The performance was slightly lower than market expectations. The decline in the company's net profit in the first three quarters was mainly due to a decrease in investment income, an increase in financial expenses, and an increase in sales expenses. Our comprehensive review is as follows:
Increased taxes and fees affected 3Q24 profits; profitability was generally stable. 1) Single quarter perspective: The company achieved revenue of 7.409 billion yuan, YOY -13.2%; net profit to mother of 0.131 billion yuan, YOY -57.0%; deducted non-net profit of 0.136 billion yuan, YOY -54.3%. The decline in the company's net profit in the third quarter was mainly due to increased financial expenses, increased taxes, and increased sales expenses, which in total affected net profit of 0.137 billion yuan. 2) In terms of profit margin: The company's gross margin fell 0.1 ppt to 12.0% year on year from 1 to 3Q24; net margin fell 1.1 ppt to 3.1% year on year. Among them, 3Q24 gross margin increased 1.4ppt to 13.9% yoy; net margin decreased 1.8ppt to 2.1% yoy. Profitability is generally stable.
Expense rates were generally stable during the period; receivables and inventory reached the highest levels in history. From 1 to 3Q24, the company's expense ratio increased by 0.6 ppt to 8.2% year on year: 1) the sales expense ratio increased 0.3 ppt to 1.7% year over year; 2) the management expense ratio decreased by 0.1 ppt to 4.0% year on year; 3) the financial expense ratio increased 0.6 ppt to 1.2% year over year, mainly due to an increase in the size of interest-bearing debt and an increase in interest expenses; and 4) the R&D expense ratio decreased by 0.2 ppt to 1.3% year over year. As of the end of 3Q24, the company: 1) accounts receivable and notes were $33.4 billion, up 9.8% from the end of 2Q24; 2) prepayments of $2.783 billion, a decrease of 17.2% from the end of 2Q24; 3) inventory of $40.227 billion, up 11.0% from the end of 2Q24, due to increased orders and increased product input; 4) Contract liabilities were $6.262 billion, a decrease of 13.2% from the end of 2Q24. At the end of 3Q24, the company's receivables and inventory reached the highest level in history since 2004. From 1 to 3Q24, the company's net cash flow from operating activities was -17.276 billion yuan, compared to -13.386 billion yuan in the same period last year, due to the increase in the pace of repayment and procurement.
Benefit from the boom in the industry; play the role of “chain leader” to drive the development of the industry. The company is committed to building a world-class aero engine company. It is domestic. The company is the only company that can develop a full spectrum of special aero engines such as turbojets, turbofans, turboprops, and pistons. Internationally, the company is one of the few companies that can independently develop aero engine products. From 2020 to 2023, the company benefited from the boom in the industry, and its revenue scale increased rapidly, from 28.6 billion yuan to 43.7 billion yuan, CAGR = 15.2%. In the future, the company will continue to build on core technology, lay out the industrial chain around the development of new quality productivity, give full play to its “chain length” driving role, and provide high-quality, high-performance, and low-energy aero engine and gas turbine products.
Investment advice: The company is a leading enterprise covering the full spectrum of aero engine production and research capabilities in China, and will fully benefit from the booming development of China's “two aircraft”. We expect the company's net profit from 2024 to 2026 to be 1.51 billion yuan, 1.895 billion yuan, and 2.366 billion yuan, respectively, corresponding to the 2024-2026 PE of 77x/61x/49x, respectively. We maintain a “recommended” rating considering the company's dominant position in the aviation development industry chain and the long-term prosperity of the industry.
Risk warning: downstream demand falls short of expectations; model batch production progress falls short of expectations; product price reduction, etc.