\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 765 Avic Heavy Machinery Co.Ltd(600765) )
Events
Recently, the company released the performance express for 2021, realizing an annual operating revenue of 8.79 billion yuan, a year-on-year increase of 31.23%; The net profit attributable to the parent company was 891 million yuan, a year-on-year increase of 159.05%.
Brief comment
Aviation forging core positions enjoy the high prosperity of the industry and high elastic growth of performance
As the traditional leader of aviation forging, the company has great monopoly advantages in R & D capacity, technical experience and process equipment capacity. The company is actually controlled by aviation industry group and widely and deeply participates in the research and development of forgings of various aviation equipment models in China, which has the advantage of non reproducible Industrial card position. Benefiting from the upgrading of aviation equipment and the high prosperity of scale, the company’s operating revenue increased by 31.23% in 2021. At the same time, due to the typical heavy asset characteristics of the forging industry, the sharp increase of its business scale brought obvious dilution of fixed costs, and the growth elasticity of the company’s performance was significant, with a significant increase of 159.05%. In 2021, the weighted average return on net assets of the company increased by 5.58pcts to 11.05% higher than expected.
Large scale, precision and intelligent industries have been upgraded, and forging has made efforts in all fields
The company raised funds twice in 2018 and 2021 to upgrade the forging industry. Hongyuan’s Xi’an New Area advanced forging industry base has added isothermal forging, precision forging, large die making and other production lines to meet the production needs of large aviation integral structure forgings and disk shaft rotating parts; The construction of civil aviation ring forging production line and isothermal forging production line of special materials by anda company can meet the supporting needs of aviation precision forgings. Through industrial upgrading, the company strengthens the aviation large and precision forging business, which is expected to surpass the whole field of aviation forging and realize the continuous growth of performance.
Raw material reserves and the layout of upstream metal recycling industry, the cost advantage is worth looking forward to
In December 2021, AVIC specialty materials, the holding subsidiary of the company, resumed operation. Special materials of aviation industry is an important strategic reserve base of special materials of the company. It has invested in the construction of 18000 square meters of special materials storage and processing center. AVIC Shanghai University, which holds 17.93% of the company’s shares, is a leader in recycling and smelting of Superalloy waste in China. The high-end metal recycling industry in the upstream of the reserve and layout of special materials shows the company’s high strategic foresight and is expected to have obvious comparative advantages in cost control against the background of the sharp rise in the prices of international nickel, titanium and other resource products.
Multiple lines of metal materials make efforts, based on national defense, military industry and high-end civil use
The company is subordinate to China aviation industry group and integrates China’s major state-owned aviation forging production enterprises. Its subordinate forging specialized enterprises include Hongyuan company, anda company and Jinghang company. Hongyuan company is mainly engaged in the development and production of large and medium-sized aircraft forgings, and anda company is mainly engaged in the development and production of aeroengine disk shaft and ring forgings, Jinghang company is mainly engaged in the development and production of small and medium-sized precision forgings for aircraft.
As a traditional processing giant of military forgings in the aviation industry, Hongyuan company has benefited from the upgrading and scale of military aircraft models, and the order share of batch production models in the military market has continued to grow. In China’s civil aviation market, ARJ21 regional airliner has been mass produced, and C919 large trunk airliner is expected to be delivered for the first time by the end of the year, opening the era of mass production. At present, the ARJ21 batch production order of Hongyuan company remains stable, focuses on the research and development process of key civil models, and is expected to enjoy the demand dividend of C919 batch of postpartum forgings. In the international civil aviation market, the T-shaped forgings of SaiFeng landing gear company have been successfully developed and delivered in batch; Honeywell’s two engine forgings passed the first piece certification on site, realizing a zero breakthrough in foreign trade engine orders; Successfully developed 8 new products of Boeing and won the “Asia best partner Award” of SaiFeng landing gear company. With the gradual and slow recovery of the international civil aviation manufacturing industry from the epidemic, the international civil aviation business of Hongyuan company is expected to rise steadily.
As an important manufacturer of ring forgings in China, anda company is gradually recovering its lost ground in the military market, successfully opening up a number of double flow ring forgings, and further expanding its market share. At the same time, anda also actively expanded the civil aviation launch market, developed Liyang international civil ring forging products, and obtained commercial orders for multiple pairs of start-up boxes. With the smooth development of civil aviation development, the civil aviation development market is expected to be further opened.
Jinghang company is mainly engaged in the forging, casting and deep processing of aircraft structural parts, engine parts and civil machinery parts. In the field of military products, we will continue to consolidate the stock market, actively participate in new military aircraft research projects, and continue to expand the military market. In the field of civil products, with small and medium-sized forging products as the core, consolidate and expand emerging industrial markets such as coal machinery and high-speed railway, and actively develop China’s civil aircraft business.
The company’s hydraulic environmental control business accounted for 24.92% of its revenue in 2020, mainly including hydraulic and heat exchanger, which are carried out by Liyuan company and Yonghong company respectively. Hydraulic products are mainly high-pressure piston pumps and motors, which are widely used in aviation, aerospace, engineering machinery and other fields. The heat exchanger business mainly develops and produces all kinds of radiators, heat exchangers and environmental control accessories, which are widely matched for China’s aerospace, engineering machinery, air compressors, medical treatment, wind power and other military and civil fields.
In June 2021, the company announced that it planned to adopt the mixed reform of equity transfer and capital increase for its wholly-owned subsidiary Liyuan Hydraulic (Suzhou) Co., Ltd. after the listing of Liyuan Hydraulic (Suzhou) with continuous losses, it is conducive to the continuous thickening of the company’s performance.
The military products business of Yonghong company continues to expand, and has made new breakthroughs in model matching in the field of small and medium-sized aircraft and ships. and; In the field of construction machinery, we will increase visits and technical exchanges with Sany Heavy machinery, Zoomlion Heavy Industry Science And Technology Co.Ltd(000157) , temporary workers, Shantui and Lovol, and continue to consolidate and strengthen cooperation with XCMG road and XCMG foundation; In the field of new energy vehicles, on the basis of stable supporting micro macro power, Eve Energy Co.Ltd(300014) has been added, and the quality audit of Evergrande automobile, Mingheng power and other companies has been completed. In the international market, we have a solid cooperative relationship with YMER and Atlas Copco and continue to maintain market share. With the compaction of China’s “double carbon” policy, the performance of the company’s products in wind power, new energy and other fields is expected to expand accordingly.
Two fixed increase fundraising, layout the upgrading of the company’s forging industry, and strengthen the business of large and precision aviation forgings
In 2018, the company will raise 1.703 billion yuan, of which 1.02 billion yuan will be used for the construction of advanced forging industry base in Xi’an New Area of Hongyuan company, adding isothermal forging production line, precision forging production line (including free forging), heat treatment production line and large die manufacturing production line, which can meet the needs of China’s large passenger aircraft, transport aircraft The production needs of large integral structure forgings and disk shaft rotating parts of high thrust engines and other types of projects; 445 million yuan is used for the construction of the civil aviation ring forging production line of Anda company to improve the intelligent manufacturing level of the production line.
In 2021, the company will raise another 1.91 billion yuan, of which 805 million yuan will be used for the transformation and upgrading of Aviation Precision Die Forging Industry in Hongyuan’s advanced forging industry base, so as to improve Hongyuan’s Aviation Precision Die Forging development and production supporting capacity, and meet the market demand of large precision die forgings for Chinese military aircraft, commercial aircraft and international commercial aircraft; 640 million yuan is used for the construction of isothermal forging production line of special materials in Wuxi Branch of Anda company.
The raw material reserve and upstream high-end metal recycling industry are laid out in advance, and the cost advantage is worth looking forward to
In December 2021, AVIC specialty materials, the holding subsidiary of the company, resumed operation.
Special materials of aviation industry is an important centralized procurement and strategic reserve base of special materials of the company. From 2013 to 2014, AVIC special materials built a special material storage and processing center, which, as part of the planning of Jingwei new area of Xi’an Economic and Technological Development Zone, undertook the task of supporting and storing materials in the construction of the new area. The warehouse processing center will build 18000 square meters of warehouse, 16 sets of storage equipment and warehouse supporting infrastructure. Its positioning includes: strategic reserve in advance and spot to meet the different needs of market users.
As the leader of high-temperature alloy smelting in China, the company can effectively reduce the demand for high-temperature alloy scrap by 17.93%. At present, AVIC Shangda can produce 120000 tons of high-performance alloy forgings such as high-temperature alloy forgings, corrosion-resistant alloy forgings and ultra-high strength alloy forgings, which are widely used in aviation, aerospace, ships, weapons, nuclear power, petroleum, chemical industry, automobile, electronics, marine engineering and other fields.
The high-end metal recycling industry in the upstream of the reserve and layout of special materials shows the company’s high strategic foresight and is expected to have obvious cost control advantages against the background of the sharp rise in the prices of international nickel, titanium and other resource products.
Profit forecast and investment suggestion: the core card position of aviation forgings, industrial upgrading + raw material layout will help the performance to grow again, and a buy rating will be given
The company is the leader of aviation forgings in China. It has the advantage of non reproducible industrial position and widely supports the research and development of forgings of various aviation equipment. The company benefited from the upgrading of aviation equipment and the volume of scale, with significant scale effect and higher than expected performance growth. The company actively carries out industrial upgrading, strengthens the processing capacity of large and precision forgings, and has obvious advantages in raw material cost control. The company’s loss clearing business, environmental control and hydraulic business, military and civilian dual line force, is expected to support the thickening of the company’s performance. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 891 million yuan, 1217 million yuan and 1.606 billion yuan respectively, with a year-on-year increase of 159.05%, 36.54% and 32.02% respectively. The corresponding EPS from 2021 to 2023 will be 0.85, 1.16 and 1.53 yuan respectively, corresponding to 52, 38 and 29 times of the current share price PE respectively. It is covered for the first time and given a “buy” rating.
Risk tips
1. The price of raw materials fluctuates too much; 2. Delay of projects under construction or insufficient production capacity; 3. Competitive price reduction of military products
