Avic Industry-Finance Holdings Co.Ltd(600705) (600705)
The new strategy breeds new growth. In 2021h1, the company’s performance has increased steadily, and the performance of its main business is stable. Leasing remains stable, trust is still an important performance growth engine, and active management transformation is gradually emerging; In addition, financial revenue remained high, and securities benefited from the recovery of the market. In 2021h1, the operating revenue was 9.4 billion yuan (YoY + 8%), and the net profit attributable to the parent company was 1.6 billion yuan (YoY + 8%).
The 14th five-year plan, industrial investment + supply chain finance, energy storage, combination of industry and finance. At the beginning of the 14th five year plan, the company focused on the three platforms of industrial investment, supply chain finance and comprehensive finance, promoted the combination of industry and finance, directly attacked the financing problems of small and medium-sized enterprises, helped the development of the military sector of the aviation industry, promoted the combination of industry and finance, and helped the development of the real economy.
Deeply plough the industrial investment field and have broad business prospects in the future. With AVIC industrial investment as the main investment body, relying on the advantages of complete industrial chain and financial license of the group, the company focuses on aviation industry and aviation related investment through direct investment and the establishment of industrial fund, and implements investment projects for the group company with a scale of more than 6 billion yuan during the 13th Five Year Plan period. During the 14th Five Year Plan period, the company will join hands with local governments and social capital forces, and the industry will continue to improve. We expect that the management scale is expected to further increase in the future, providing a new driving force for the growth of the company’s value.
Foreign factors promote the military industry, and the financing demand of the industrial chain increases. Since 2020, China’s geopolitical risks have intensified, and the field of national defense and military industry has attracted much attention. In 2021, China’s military expenditure budget has increased by 6.8% year-on-year, and the difference between military expenditure and public financial expenditure has reached 5.09%, of which equipment expenditure has gradually become the leading military expenditure. In addition, it includes the mixed reform of state-owned enterprises, the military civilian integration mode of civil participation in the army, and the transfer of the industrial chain to China to promote the huge financing potential of private enterprises. However, because the military industry investment has three pain points of “unclear, untouchable and investment”, the investment resistance of traditional enterprises is large, the number is small, and the industry investment gap is obvious.
With three advantages, AVIC has a promising prospect of production and investment. 1) Relying on the group’s military background, industrial technology path and excellent team. The group’s management team has rich experience in industry. Relying on the group’s military background and technical path, it improves its ability to judge the feasibility of the project, with the help of AVIC securities investment research team, it greatly improves the success rate of industrial investment. 2) Relying on the group’s resources, it has gone deep into various subdivided fields and has the advantage of project reserve quantity. The group has a large number of industries and high penetration rates in the upper, middle and lower reaches of the industrial chain. The company is limited by the disclosure restrictions of the military industry. It can give priority to detecting the financing needs of enterprises in the industrial chain and excavate and obtain high-quality projects in advance. 3) Brand effect superimposed with full license synergy to further expand advantages. The company’s central enterprise background and the advantages of the company’s comprehensive financial platform license can cover the financial needs of itself and customers in the whole life cycle, further increase the company’s financing strength and enhance its competitive advantage.
The reform of the capital market has accelerated, and industry and investment have ushered in new opportunities. With the implementation of the registration system on the science and innovation board and the gem and the opening of the Beijing stock exchange, the Sina wave of capital market reform will accelerate the full implementation of the registration system, which will not only help solve the problems of difficult and expensive financing of small and medium-sized enterprises, but also greatly activate the vitality of the industry and investment industry. Reduce the IPO threshold, broaden the exit channels of production and investment, shorten the investment cycle and improve the investment income. The capital market reform will revitalize the primary and secondary enterprises and bring significant profit growth to the company’s production and investment business.
Supply chain finance is expected to contribute a new source of income. Suppliers in the military industry have capital turnover problems and high financing needs, but the confidentiality of the industry hinders the intervention of financial institutions. Avic Industry-Finance Holdings Co.Ltd(600705) relying on the core position of the group’s affiliated units in the aviation and military industry chain, it can effectively break the access barriers. The group’s “Golden Network” has a deep accumulation of supplier information. It solves the pain points of traditional factoring business, reduces the cost of military industry chain and improves the operation efficiency of enterprises by playing the role of technical service provider in the supply chain financial ecology.
Investment suggestion: buy – a investment rating. We expect that the company’s EPS from 2021 to 2023 will be 0.44 yuan, 0.49 yuan and 0.54 yuan respectively, and the six-month target price will be 5.3 yuan, corresponding to a P / E of 12x in 2021.
Risk warning: the combination of industry and finance is not as expected / operational risk / macroeconomic downside risk / policy risk
