Results in the first three quarters of 2023 are in line with market expectations
The company announced its results for the first three quarters of 2023: revenue of 2.195 billion yuan, year-on-year + 20.52%; net profit of 503 million yuan, + 25.02%; deduction of non-net profit of 503 million yuan, + 24.61% of the same period last year. In a single quarter, 3Q23's revenue was 877 million yuan, year-on-year + 23.11%, month-on-month + 19.15%; return to the mother net profit of 207 million yuan, year-on-year + 18.14%, month-on-month + 18.41%. The company's performance is in line with market expectations.
Trend of development
The performance grew steadily in the first three quarters, and the enhanced ability of fee control drove the net interest rate to rise. 1) the company's 1~3Q23 revenue increased by 23.11% over the same period last year, with an increase in orders in the downstream market and steady growth in revenue. 2) 1~3Q23 sales gross profit margin and net profit margin year-on-year-1.83ppt/+0.75ppt to 34.52% annualised 22.91%. The slight decline in sales gross profit margin is attributed to the change in product delivery structure, while the increase in net profit margin is mainly due to the company's continued efforts to strengthen cost control and improve lean management, with the expense rate from-0.85ppt to 8.29% year-on-year.
Focus on key technological projects to increase investment in research and development, forward-looking indicators show that the downstream is expected to continue to thrive.
1) 1~3Q23 's R & D expenditure is from + 41.27% to 151 million yuan compared with the same period last year, and the company pays close attention to the key technologies at the forefront of science and technology, laying a solid foundation for speeding up and improving the supporting capacity of the industry. 2) as of the end of 3Q23, the company's inventory was 1.106 billion yuan, which was basically the same as at the beginning of the year and remained high. We believe that the forward-looking indicators show that the downstream is expected to continue to thrive, and the company is actively preparing goods and production. 3) the net cash flow of 1~3Q23 operating activities increased by 141 million yuan to-35 million yuan compared with the same period last year, while the net cash outflow from operating activities narrowed year-on-year, mainly due to an increase of 104 million yuan in cash received from the sale of goods and services.
Aviation Materials Institute under the aviation advanced materials comprehensive industry platform, fund-raising projects to enhance the core competitiveness. 1) there are four divisions of titanium alloy castings / rubber sealing materials / aircraft cockpit transparent parts / superalloy master alloy under the aviation materials stock, which is the comprehensive industrialization platform of aviation advanced materials under the Institute of Aeronautical Materials. 2) the company announced that in July 2023, IPO raised a total of 7.1 billion yuan, of which 3.6 billion yuan was used for elastomer materials, aviation transparent parts, large aircraft windshield glass, high temperature master alloy, titanium alloy parts process upgrading and other projects, we believe that it is expected to alleviate the company's capacity bottleneck and further enhance the company's core competitiveness.
Profit forecast and valuation
We keep the net profit forecast for 2023max in 2024 at RMB 581 million. The current share price corresponds to 36.4x Ppace E in 2024. We maintain the outperform industry rating and maintain the target price of 77.48 yuan, corresponding to 45.0x Pbig E in 2024, with a potential increase of 23.5%.
Risk
1) macro environment and policy risk; 2) lower-than-expected risk of order and delivery.