Avic Xi’An Aircraft Industry Group Company Ltd(000768) (000768)
The leading platform for R & D and manufacturing of military and civil medium and large aircraft has realized the reorganization and listing of the whole machine assets
The company is a leading platform for R & D and manufacturing of medium and large military and civil aircraft in China, fully known as Avic Xi’An Aircraft Industry Group Company Ltd(000768) . It is a super large aviation industry enterprise integrating scientific research and production. It is the R & D and production base of medium and large military and civil aircraft in China. It is the main manufacturer of large and medium-sized transport aircraft, bombers, special aircraft and other aircraft products in China, and one of the important transport aircraft suppliers in the Chinese market, It is an important supplier of Xinzhou series aircraft, C919 passenger aircraft, ARJ21 aircraft, ag600 aircraft and foreign civil aircraft.
In 2020, the company carried out asset replacement, transformed from providing related party transactions within the group to a resource platform for military complete machine design, R & D, production, manufacturing and maintenance services, and ushered in value revaluation. When the listed company becomes the main unit of XAC group, the supply chain loss of the group’s procurement system will be restored, which is conducive to the company’s cost control, reducing the lease amount of related party transactions and improving the profitability. In 2020, the company achieved a revenue of 33.484 billion yuan, a year-on-year increase of 4.38%, a decrease of 3.6 percentage points compared with the growth rate of the previous year, mainly due to the decline in the income of international subcontracting business affected by the epidemic; The net profit attributable to the parent company was 777 million yuan, a year-on-year decrease of 27.65%. Excluding the impact of non sustainable special factors, the company’s net profit attributable to shareholders of Listed Companies in 2020 increased by 85.04 million yuan compared with 2019, a year-on-year increase of 12.29%. In the first three quarters of 2021, the company achieved a revenue of 22.649 billion yuan, a year-on-year increase of 2.03%; The net profit attributable to the parent company was 607 million yuan, a year-on-year increase of 0.22%; Net profit deducted from non parent company was 417 million yuan, with a year-on-year increase of 28.42%. It is mainly due to the company’s adjustment of product delivery structure and production organization structure, resulting in an increase in net profit. We believe that at present, the company is in the stage of product structure adjustment. With the gradual increase of new products, the profitability of the company is expected to be further improved.
The release of new capacity is imminent, and the inflection point of performance growth can be expected
Avic Xi’An Aircraft Industry Group Company Ltd(000768) the digital equipment production line construction project with an accumulated investment of 530 million yuan is expected to be put into use on October 31, 2021. At the same time, the 2021 interim report disclosed that 10 production capacity construction projects are expected to be completed and reach production capacity between 2021 and 2023. We believe that the military aircraft industry is highly planned and has the prominent characteristic of “determining production by sales”. As a host unit, Avic Xi’An Aircraft Industry Group Company Ltd(000768) is closely related to the model development progress, and the capacity construction has been started earlier. It is expected to usher in a performance inflection point led by the new capacity to reach production in the next two years.
On the statement side, in the first three quarters of 2021, the company’s advance receipts and contract liabilities totaled 5.754 billion yuan, a significant year-on-year increase of 379.65%, and the inventory reached 23.976 billion yuan, a year-on-year increase of 18.44%. We believe that the substantial growth of the company’s inventory and contract liabilities indicates that the company’s product demand continues to increase, and the company is in a state of active production and goods preparation. It is expected that the performance will be released rapidly with the delivery of products.
Military civilian dual track drive to open the high boom stage of the large aircraft market
National defense expenditure and equipment expenditure increased steadily, with the focus on building strategic delivery and strike capability. China’s total economy has continued to grow, and national defense spending has increased steadily. In 2020, the growth rate of national defense military expenditure will be 6.7%, reaching about 1.27 trillion, breaking trillion for four consecutive years. Compared with 2% ~ 4% of GDP of military expenditure in developed countries, China’s military expenditure burden is relatively light, leaving room for growth for the subsequent increase of military expenditure. The upgrading of weapons and equipment is an important factor in improving the modernization of the Chinese army, and the proportion is expected to increase to 40% in the future. The next five years will be a critical period for our army to build strategic delivery and long-range strike capability. The large military aircraft market has stable expansion space, and the company is about to start the production capacity climbing stage.
The strong demand of China’s civil aviation transportation market leads the development of domestic civil aircraft industry. China will become the largest country in demand for civil aviation aircraft in the future, and the demand gap will strongly promote the development of domestic large aircraft. It is estimated that the new delivery volume of China’s civil aviation aircraft from 2020 to 2039 will be 8725, and the cumulative market space over the past 20 years will be US $1325 billion. Estimated at the exchange rate of RMB 6.95/us $1, the purchase value of China’s civil aviation aircraft is expected to be about RMB 9.21 trillion in the next 19 years, with an average annual value of 0.48 trillion. By 2039, China’s share of the global passenger aircraft fleet will increase from 16.19% to 21.71%. As the core supplier of domestic civil C919 aircraft and ARJ21 aircraft, the company will fully benefit from the high business cycle of domestic civil aircraft industry.
Profit forecast and investment suggestions: the company’s military products business will benefit from the upgrading of our military aviation equipment, and is expected to continue to grow rapidly in the next 3-5 years; At the same time, with the gradual landing of China’s large aircraft projects, the company’s relevant civil products are expected to be further expanded. Therefore, we estimate that the growth rate of the company’s revenue from 2021 to 2023 will be 11% / 22% / 25%, the corresponding revenue will be 37.168/45.344/56.681 billion yuan respectively, the corresponding net profit attributable to the parent company will be 10.12/13.42/1.755 billion yuan respectively, and EPS is expected to be 0.37/0.48/0.63 yuan, which is 100.41/75.67/57.89x according to the closing price on November 25.
Risk warning: the price fluctuation risk of military product approval; The batch production speed of new model products is lower than expected; C919 evidence delivery speed is lower than expected, etc
