The company issued an annual performance forecast for 2019: the company expects to achieve a net profit of 7293.76-88.0282 million yuan, up 45% from 50.3018 million yuan in the same period last year.

During the reporting period, the company's revenue and net profit increased significantly compared with the same period last year, mainly because: 1) equipment development and guarantee business new customer orders gradually landed, opening up a new broad market space; 2) airborne equipment development business new model products delivered smoothly (3) in terms of aviation maintenance and service business, Estonian Magnetic aircraft maintenance Co., Ltd. is doing well, which has a synergy with the company's existing business and has a positive impact on the company's net profit. In addition, the company's sales rebate is good, and the operating cash flow has been significantly improved.

On a quarterly basis, the company's 2019Q4 is expected to achieve a net profit of 2008-35.17 million yuan (27.62 million yuan), an increase of 52.45 percent (109.74 percent) and 0.19 percent (37.84 percent) over the same period last year. Based on the median forecast of the annual performance, the net profit of 2019Q4 is 27.62 million yuan, accounting for 34.32% of the annual net profit of Q4, 2017Q4 and 2018Q4 in 2016, accounting for 38.32%, 38.79% and 12.65% respectively.

In addition, the company's non-recurrent profit and loss in 2019 is expected to be about 16.8259 million yuan (mainly government subsidies), a decrease of 1.6432 million yuan compared with 15.1827 million yuan in 2018.

We maintain our profit forecast and expect the company to have an EPS0.34/0.47/0.66 per share in 2019-2021, corresponding to a valuation of 49-35-25 (2020-1-16), and continue to give the company a "prudent overweight" rating.

Risk tips: military procurement is lower than expected, civil aviation maintenance market competition intensified.