Incident: The company released its 2024 three-quarter report. In the first three quarters, it achieved operating income of 25.298 billion yuan, a year-on-year decrease of 26.95%; realized net profit to mother of 1.818 billion yuan, a year-on-year decrease of 23.12%.

The industry cycle fluctuates, and short-term performance is significantly hampered

In the first three quarters of 2024, the company achieved operating income of 25.298 billion yuan (-26.95%), mainly due to the schedule of contract signing, due to the failure to sign the contract as scheduled; net profit attributable to mother was 1.818 billion yuan (-23.12%), and net profit after deducting non-return to mother was 1.786 billion yuan (-22.31%). Looking at a single quarter, 24Q3 achieved revenue of 3.673 billion yuan, -68.01% YoY/-69.73% YoY; net profit to mother was 0.199 billion yuan, or -77.9% YoY. The industry has experienced cyclical fluctuations, and the company's performance has been blocked in the short term, and it is still optimistic about medium- to long-term development.

In 2024, the company expects to achieve operating income of 51.026 billion yuan, an increase of 4.778 billion yuan over the same period last year, an increase of 10.33% over the same period last year, mainly an increase in sales volume; it is expected to achieve net profit of 3.762 billion yuan, an increase of 0.752 billion yuan over the same period last year, an increase of 25.00% over the same period last year.

Continuously optimize operating efficiency and increase profitability steadily

In terms of profitability, the company's gross sales margin for the first three quarters was 12.48% (+1.63pct), the net margin was 7.14% (+0.39pct), and the period expense ratio was 3.60% (+1.11pct), of which the sales/management/ R&D expense ratios were 0.01% (-0.02pct), respectively

/2.07% (+0.37pct)/2.35% (+0.78pct). The company actively adheres to the action spirit of “improving quality, increasing efficiency and valuing return”, and its profitability continues to improve.

At the end of 2024Q3, the company's accounts receivable were 15.515 billion yuan, an increase of 117.79% over the end of the previous year, mainly due to unrecovered payment for some products sold; inventory was 11.489 billion yuan, a decrease of 1.38% from the end of the previous year; and contract liabilities were 5.814 billion yuan, a decrease of 13.29% from the end of the previous year, mainly due to prior advance payments and confirmed revenue in the current period.

The increase in the estimated amount of daily related transactions in 2024 indicates confidence that the company's performance will recover. The company issued an announcement to increase the estimated amount of daily related transactions in 2024. Due to development needs, the company expects to increase the amount of related transactions sold to related parties China Aviation Industry Group Co., Ltd. and its subsidiaries. The original estimated amount for 2024 was 1863.787 million yuan, and the actual accrued value for January-August was 1638.656 million yuan. This time, it is proposed to add 0.85 billion yuan, new The amount is expected to increase to 2713.877 million yuan, accounting for 5.42% of similar businesses, demonstrating the company's confidence that performance will recover.

Profit forecast: The company is a leader in the field of aviation defense equipment, has strong core competitiveness, and is improving in the medium to long term. The company's net profit from 2024 to 2026 is estimated to be 3.713, 4.452, and 5.218 billion yuan, respectively, and the corresponding EPS is 1.35, 1.62, and 1.89 yuan, respectively, and the corresponding PE is 36.19, 30.18, and 25.75 times, respectively, maintaining the “Highly Recommended” rating.

Risk warning: macroeconomic development risk, production and operation risk, defense budget falling short of expectations.