\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 765 Avic Heavy Machinery Co.Ltd(600765) )
Event: the company released its 2021 annual report, which realized revenue (RMB 8790 million, + 31.23%), net profit attributable to the parent (RMB 891 million, + 159.05%), and deducted net profit not attributable to the parent (RMB 724 million, + 166.60%).
Focusing on the main business, tapping potential and reducing consumption have achieved results. The sales of related party transactions are expected to increase by 33.33% in 2022. Benefiting from the increase of orders in the downstream market and the improvement of the company’s own delivery capacity, the company’s revenue and profit have increased significantly, and the net profit attributable to the parent of Q1-Q4 has increased by 88.76%, 143.84%, 127.76% and 274.16% respectively, including:
1) forging and casting business, revenue (RMB 699 million, + 34.49%), of which aviation business accounted for a steady increase in China’s share, effectively supported the annual production and operation tasks, and achieved revenue (RMB 5.731 billion, + 37.02%): Xi Hongyuan, the share of batch production models in the military market continued to grow, and a batch of production orders of Chinese civil aircraft remained stable, At the same time, the batch production of a certain type of forging is successfully realized in the international civil aviation market; 2. The market share of the new products of the CJ1000 has been further improved. The market share of the civil aviation market in the commercial low pressure turbine box and the front and rear installation platform products has been orderly increased. According to the official account of Anda, as of the end of February 2022, the company has fulfilled the output value of 22Q1 2/3 above the designated level. ③ Jinghang takes order clearing as the starting point and vigorously promotes the process optimization suitable for mass production.
2) hydraulic environmental control business, revenue (2.091 billion yuan, + 21.78%), including: ① Liyuan, focusing on improving military product business management ability and product delivery ability, while focusing on reducing cost and increasing efficiency of civil products and optimizing resource allocation, the average monthly delivery of main products increased by nearly 40% year-on-year, realizing revenue (906 million yuan, + 10.35%); ② Yonghong increased the research and development of military products market, achieved the supporting qualification of two aviation development projects, achieved zero supporting situation in the field of small development, achieved new expansion of military products supporting, and achieved revenue (1.167 billion yuan, + 32.61%). The gross profit margin and net profit margin have increased simultaneously, focusing on the main business and tapping the potential to reduce consumption has achieved results. In 2021, the company’s gross profit margin increased by 1.69pct to 28.33% year-on-year, and Q1 – Q4 were 24.41%, 29.66%, 32.64% and 25.88% respectively, reflecting the orderly increase of the company’s focus on the main business and the delivery of high value-added products; The net interest rate increased by 4.64pct to 11% year-on-year. It is expected that the apparent loss source Liyuan Hydraulic Suzhou subsidiary has completed the stripping work. At the same time, the company continues to tap the potential and reduce consumption, the expense rate during the period has decreased by 3.04 PCT to 13.17%, and the disposal of Liyuan Hydraulic Suzhou equity in 21q4 has generated an investment income of 140 million yuan. At the same time, it should be noted that, The company has accrued 138 million yuan of asset impairment reserves in 21 Q4. We believe that the company’s profitability may still have room to improve with the rising prosperity of the industry and the improvement of quality and efficiency after the gradual production of the company’s new production capacity.
The total profit of 2022 is expected to be 1.2 billion yuan, and the predicted value of goods sold by related party transactions increased by 33.33% year-on-year. According to the annual report, the company expects to achieve a total revenue and profit of 10 billion yuan and 1.2 billion yuan respectively in 2022. If Liyuan Suzhou is deducted under the same caliber, it will increase by 19.45% and 19.52% year-on-year respectively. In addition, according to the announcement of related party transactions of the company, it is expected to sell products and provide labor services to related parties by 4 billion yuan in 2022, with a year-on-year increase of 33.33% and 37.41% respectively compared with the expected value and actual completion value in 021. With reference to the 2020 annual report, the company plans to target a total revenue and profit of 7.38 billion yuan and 5.5 billion yuan respectively in 2021700 million yuan, while the actual completion value was 8.79 billion yuan and 1.144 billion yuan. Therefore, we believe that the predicted value of goods sold by related party transactions may have more reference value for income. The forward-looking indicators of the balance sheet performed prominently, and the cash flow increased significantly. The company’s prepayment increased by 89.99% compared with the beginning of the period, mainly due to the increase in the purchase of raw materials. The receipt of prepayment from customers in 2021 led to the increase of the company’s contract liabilities from 65 million yuan at the beginning of the period to 829 million yuan at the end of the period, which was only 65 million yuan at the beginning of the period, and led to a significant increase of 130.48% in net cash flow. We believe that the substantial growth of prepayments and contract liabilities reflects the current strong downstream demand, and the company is actively preparing for production and goods.
Fixed raising and investment will strengthen production capacity, and equity incentive will help long-term development
In 2018 and 2020, the company raised 1.327 billion yuan and 1.91 billion yuan respectively for the implementation of the company’s forging, hydraulic and heat exchanger main industry capacity-building projects, continuously enhance the main industry production capacity, and expand the market share of civil products while strengthening the market advantage of military products; In addition, in 2020, the company increased capital. Anji precision casting continued to expand the upstream and downstream of the industrial chain, improve the layout, and consolidate the important position and influence of the company’s precision castings in supporting national defense weapons and equipment. Meanwhile, the company launched the equity incentive plan in 2020, granting 7.77 million shares (accounting for 0.83% of the total share capital) of restricted shares to 115 employees such as directors, senior executives and core technicians at the price of 6.89 yuan / share. It is expected that after the company launched the equity incentive plan, it will successfully bind the core business backbone interests and continuously mobilize the enthusiasm of employees, which is expected to greatly improve the management and operation ability of the company, Accelerate the release of performance, enhance the company’s core competitiveness and contribute to long-term development.
Investment suggestion: as the leader of China’s military aviation forging, the company has a long supporting history and strong technical strength, and has successively enhanced its production capacity through two fixed raising and investment. The leading position is stable, and is expected to benefit from the continuous upward demand brought by the batch production of new models of aviation development. At the same time, the company continues to peel off inefficient and loss making assets, While accelerating the focus on the main aviation industry, the overall profitability is still expected to improve gradually; In addition, the company launched the equity incentive plan in 2020, which is expected to further accelerate the release of performance and enhance the company’s core competitiveness at the expense control end while successfully binding the interests of the backbone of the core business. It is estimated that the net profit attributable to the parent company from 2022 to 2023 will be 1.293 billion yuan and 1.762 billion yuan respectively, with corresponding valuations of 36 and 26 times respectively, maintaining the “Buy-A” rating.
Military product risk: less than expected progress; The loss reduction of hydraulic civil products was less than expected.
