For the first time, the overweight rating was given. We estimate that AVIC's net profit from 2020 to 2022 will be 2.37 billion yuan, 2.97 billion, 2.97 billion yuan, respectively, and the corresponding PE will be 15.4, 12.4, 10.0, respectively, with the first overweight rating.
The number of military aircraft in China is insufficient and needs to be filled urgently, and the business of helicopters and trainers is expected to grow at a high speed.
1) at present, the number of helicopters in China is less than 20% of that of the United States, and the military strength and economic strength do not match. According to the China Direct shares 2020 report, the company's main sales models have changed, while R & D expenses have been reduced by 17.53 million yuan compared with the same period last year. We believe that the company's new products have gradually entered the volume stage, and the 14th five-year Plan is expected to speed up the installation. 2) with the gradual installation of the third-and fourth-generation fighters of our army, the supporting trainers should be upgraded at the same time. At present, the number of advanced trainers in our country is insufficient and needs to be filled urgently. 3) China's new generation of military aircraft have been in service one after another, and the Air Force has entered the 20th era in an all-round way, and the intergenerational and quantitative gap between our military aircraft and developed countries will be gradually narrowed in the future. It is expected that the installation of our military aircraft will be prosperous during the 14th five-year Plan period. Subsidiary Zhongzhi shares and Hongdu Aviation are the leaders of China's helicopters and trainers respectively, and they are expected to fully benefit, and the high performance growth of the 14th five-year Plan is expected.
4) announced the acquisition of shares in Hafei Group and Changfei Group, if the acquisition is smooth, it can greatly enhance the profitability and competitiveness of helicopter business.
The aerospace industry is booming, and the military parts business is expected to accelerate its growth during the 14th five-year Plan. 1) looking forward to the 14th five-year Plan, with reference to the development experience of the US military and in the light of China's national conditions, we expect that third-and fourth-generation aerospace and aviation equipment are expected to become the focus of equipment investment, and aerospace is expected to be prosperous during the 14th five-year Plan.
2) the subsidiary AVIC Optoelectronics is the leader of military connectors in China, with a high proportion of aerospace and aviation revenue, and is expected to accelerate its growth during the 14th five-year Plan. 3) AVIC, a subsidiary of AVIC, is the leader of China's military aircraft avionics and actively participates in the domestic replacement of C919 avionics equipment. In the next 20 years, the market space of China's military aircraft avionics and civil aircraft avionics is expected to reach 500 billion yuan and 6 trillion yuan respectively. Benefiting from the high prosperity of military aircraft and the domestic replacement of C919, AVIC has broad prospects.
Catalyst: subsidiary capacity expansion.
Risk hint: the batch production of military aircraft is not as expected, and the equity acquisition is not as expected.