Core views:

Incident: The company released its quarterly report for the third quarter of '24, achieving revenue of 1.274 billion yuan, up 5.29% year on year, up 3.61% month on month, net profit of 0.308 billion yuan, up 5.25% year on year, 22.09% month on month, gross profit margin of 41.07% (YOY+4.12PPs), and net profit margin of 24.41% (YOY-0.31pps) in the third quarter.

The operation is steady and has strong certainty. The participating carbon fiber company Changsheng Technology has grasped key links in the industrial chain and set up subsidiaries to accelerate the layout of the low-altitude economy. In the first three quarters of 24, we achieved revenue of 3.821 billion yuan (YoY +5.48%), net profit of 0.912 billion yuan (YoY +8.00%), net profit of 0.898 billion yuan (YoY +12.13%), gross profit margin 38.52% (YoY+1.08pps), and net profit of 24.12% (YOY+0.69pps). By business, aviation new materials revenue and net profit increased 6.19% and 10.74%, respectively, due to pre-emption Delivery of carbon and carbon brake products increased; revenue from the advanced aviation manufacturing technology industrialization business increased 4.64% year on year, and net profit loss decreased by 6.0929 million yuan, mainly due to lower labor costs and reduced delivery of low-margin products. During the reporting period, the company increased its share of carbon fiber company Changsheng Technology by 20% with 0.342 billion yuan in cash to give full play to the company's key role in the aviation industry chain and build a world-class composite materials company with international competitiveness. On October 19, the company announced that it plans to invest 0.102 billion yuan with China Aviation Manufacturing and Changsheng Technology, a subsidiary of the China Aviation Manufacturing Technology Research Institute, to jointly establish a subsidiary in Shenzhen and hold 60% of the shares to quickly integrate into the development of the low-altitude economic industrial cluster and enhance its control in the aviation composite materials industry chain. The subsidiary mainly undertakes industrial research projects at the national and local levels, and provides pre-impregnated shelf products and structural components for low-altitude equipment such as eVTOL and drones.

Profit forecast and investment advice: EPS is expected to be 0.85 yuan/share, 1.07 yuan/share, and 1.31 yuan/share for 24-26, respectively. Referring to comparable company valuations, considering the company's technical barriers, core supporting position, and increased sentiment in the downstream civil aviation market, etc., the company was given 30 times PE over 24 years, corresponding to a reasonable value of 25.51 yuan/share, maintaining an “increase in holdings” rating.

Risk warning: low expectations for R&D progress; low expectations for equipment delivery; risk of major policy adjustments, etc.