Key points of investment

Aviation Materials Co., Ltd. is a core supplier of domestic military and civil aviation aircraft. The company is a listed company under China Aviation Development's Beijing Aeronautical Materials Research Institute (Aviation Materials Institute). It has a leading technical level in the four main business areas of titanium alloy castings, rubber and seals, transparent parts, and superalloy master alloys, and is in an advanced international position. Its products are widely used in aero engines, aircraft, aviation helicopters, and space missiles.

Military demand is speeding up and shifting gears, and the aviation materials market has broad prospects. There is a gap between the quantity and structure of China's aviation equipment compared to the US and Russia, and there is a huge gap in demand for equipment. With the increase in investment in national defense and military spending, the incremental replacement of military aircraft, and the imminent mass production of multiple “two aircraft” models, the military aviation materials market remains booming.

The prosperity of the civil aviation market has increased, and localization has helped development. As demand for shipping grows rapidly, China's demand for the number of aircraft continues to rise. In the future, large-scale delivery of large domestic aircraft represented by the C919 is expected to open up a massive market for domestically produced aviation materials.

It is the only listing platform under the Aviation Materials Research Institute, and is rich in high-quality assets in vitro. The Aviation Materials Institute is mainly engaged in basic research on advanced aviation materials applications, material development and application technology research, and engineering technology research. After more than 60 years of development, the Aviation Materials Institute has covered more than 60 majors in 17 fields of materials technology.

Deeply involved in the field of aviation materials, covering all metals and non-metals. In aviation equipment, both metallic and non-metallic materials play a critical role. The two are closely linked and complement each other. The company has strong strength in both metallic and non-metallic materials, has a complete product matrix, can better carry out R&D collaboration, and better meet customer needs.

Fully equipped with mainstream models, deeply tied to core customers. With advanced process technology, the company has undertaken many key model development tasks. The products cover many key fields of military aviation materials, and has established long-term and good cooperative relationships with internationally renowned aviation industry companies such as Airbus, Safran, Rolo, GE Aviation, and Honeywell, with high customer loyalty.

We expect the company's net profit to be 578/763/987 million yuan respectively for 2023-2025, EPS of 1.28/1.70/2.19 yuan respectively, and PE corresponding to the closing price of October 17 to be 47.5/36.0/27.8 times. The first coverage gives a “increase in holdings” rating.

Risk warning: Industry competition intensifies; downstream demand falls short of expectations; raw material prices fluctuate; Western Superconductor is a market-making company on the Science and Technology Innovation Board of Societe Generale Securities.