\u3000\u3000 Avic Heavy Machinery Co.Ltd(600765) (600765)
Event: Recently, the company released the performance forecast for 2021, which is expected to realize the net profit attributable to the parent company of 870 million, yoy + 153.05%. 2021q1 ~ Q3 realize the net profit attributable to the parent company of 610 million and deduct the non net profit of 590 million. Therefore, 4q21 is expected to realize the net profit attributable to the parent company of 260 million, yoy + 246.8%. The performance forecast slightly exceeded the market expectation. We believe that the net profit attributable to the parent company in 2021 is expected to be about 2.5 times that in 2020, and the year-on-year growth rate of 4q21 is as high as 247%. The scale effect of the company is obvious, the profit margin is continuously improved, and the performance is released rapidly.
Focus on aviation forging business, with a significant increase in orders on hand. In 2017, the company sold its new energy business and began to focus on forging and casting business and hydraulic environmental control business. From 2017 to 2020, the company achieved remarkable results in the special work of improving quality and efficiency, controlling losses and reducing losses, significantly improved the operating efficiency of its main business and significantly improved its profitability. In the first three quarters of 2021, the company's net profit margin was 4.2%, 7.3% and 16.2% respectively, with a year-on-year increase of 1.2ppt, 3.2ppt and 8.7ppt respectively. By the end of the third quarter of 2021, the total contractual liabilities of the company had reached 749 million, yoy + 1519.9%; The total inventory is 3.186 billion, yoy + 30.7%. The company has full orders on hand, which fully reflects the boom demand of the downstream.
Raise investment projects to strengthen the leading position. In 2019 and 2021, the company carried out fixed increase and expansion of production respectively. In 2021, the company raised 1.91 billion yuan to build the transformation and upgrading project of Aviation Precision Die Forging Industry (proposed investment of 810 million) and the construction project of isothermal forging production line of special materials (proposed investment of 640 million). The construction project of Xi'an New Area advanced forging industry base (with an investment of 1.39 billion) is expected to be completed and reach production capacity in 2023, and the construction project of civil aviation ring forging production line (with an investment of 450 million) The national key equipment key hydraulic basic parts supporting production capacity construction project (with an investment of 300 million) and the dual-use aviation high-efficiency heat exchanger and integrated production capacity construction project (with an investment of 70 million) are planned to be put into operation in 2022. The capacity expansion will further strengthen the leading position of the company and provide support for the sustainable development of the company's aviation and engine forging business.
Governance has been continuously improved, and the effect of equity incentive is remarkable. The company issued an equity incentive announcement in July 2020, granting 7770000 shares (accounting for 0.65% of the total share capital) to 116 people, including middle-level and above managers, core technicians and senior executives of subsidiaries, at the price of 6.89 yuan / share. The company's equity incentive plan helps to improve the enthusiasm of employees and accelerate the release of the company's performance.
Investment suggestion: we expect the net profit attributable to the parent company from 2021 to 2023 to be 871 million yuan, 1.402 billion yuan and 1.997 billion yuan respectively. The current share price corresponds to 49x / 30x / 21x PE from 2021 to 2023. Taking into account the continuous high outlook of the downstream industry and the leading position of the company, we give the company 40 times PE in 2022. The company's EPS in 2022 is 1.33 yuan / share, corresponding to the target price of 53.33 yuan. We cover it for the first time and give it a "recommended" rating.
Risk warning: downstream demand is less than expected; Changes in industry competition pattern; The order delivery progress is less than expected.
