\u3000\u3 Guocheng Mining Co.Ltd(000688) 586 Hefei Jianghang Aircraft Equipment Co.Ltd(688586) )
Event:
On the evening of March 14, 2022, the company released its annual report for 2021. The annual revenue was 953 million yuan (+ 14.72%), the net profit attributable to the parent company was 231 million yuan (+ 19.23%), and the net profit not attributable to the parent company was 201 million yuan (+ 27.70%); Among them, Q4 achieved a revenue of RMB 229 million (- 12.73%) and a net profit attributable to the parent company of RMB 33 million (- 7.49%); Contract liabilities reached 379 million, an increase of 66.23% over the end of the previous quarter.
Comments:
1) the annual revenue has achieved good growth, and the continuous high R & D investment ensures the continuous improvement of profitability. Revenue side: in 2021, the company achieved revenue of 953 million yuan, a year-on-year increase of 14.72%, higher than the growth rate of the group, mainly because the company strengthened market development and expansion, explored potential customers, expanded revenue scale and increased revenue of all business segments; Among them, the aviation business realized a revenue of 599 million yuan, with a year-on-year increase of 18.92%, accounting for 62.85% of the operating revenue, which was further improved compared with 2020. The company’s aviation products are equipped with all military aircraft in research and in service and some civil aircraft. At present, the replacement and assembly of aviation equipment is accelerated, the company’s enjoyment and supporting value are increased, and the future growth is highly certain; In the whole year, the special refrigeration business achieved a revenue of 232 million yuan, with a year-on-year increase of 11.37%, accounting for 24.30% of the operating revenue. It is mainly due to the special refrigeration business tracking the research and pre research projects of the main engine factory during the 14th five year plan, tamping the foundation, strengthening management, developing strengths and weaknesses, and strengthening the market research on the temperature regulating equipment of naval main battle ships. Considering the broader market of special refrigeration, It is expected to have higher performance flexibility; In addition, the company also actively promoted the life-cycle service guarantee of aviation equipment, explored the potential maintenance business market, expanded the market of high value-added products in the engine field, expanded the rail transit oxygen generator project, independently developed new oxygen equipment testers, and achieved an operating revenue of 122 million yuan in maintenance and other businesses, with a year-on-year increase of 2.81%, accounting for 12.85% of the operating revenue.
Profit side: the growth rate of net profit in 2021 was 19.23%, and the growth rate of deducting non net profit was 27.70%, both higher than the growth rate of revenue. The gross profit margin in the reporting period was 43.61%, with a year-on-year increase of 2.10pct, reaching the peak of the annual gross profit margin since the establishment of the company, and showing an increasing trend year by year in the past four years, or mainly due to the company’s key reform and high R & D investment. It is expected that with the improvement of the overall scale, the scale effect will drive the company’s gross profit margin to continue to increase. Among them, the gross profit margin of aviation products was 41.23%, an increase of 1.52 PCT compared with 2020, or on the one hand, with the acceleration of the assembly of new models, the supporting value of the company’s new models was higher, so the gross profit margin increased; Secondly, with the increase of the company’s delivery scale, the allocation of equipment and labor costs may decline; The gross profit margin of refrigeration business was 41.04%, an increase of 3.47 PCT compared with 2020, mainly due to Swan refrigeration actively striving for new projects, further expanding the market, and increasing the business of shelter air conditioning and liquid cooling equipment; In addition, the gross profit margin of other products was 59.40%, an increase of 5.09pct compared with 2020, mainly due to the company’s active development of business, and the proportion of business income with higher gross profit margin increased this year.
Cost side: during the reporting period, the expense ratio was 20.09%, significantly improved by 2.15pct year-on-year, of which the sales expense ratio improved by 0.29pct year-on-year, mainly due to the rapid growth of revenue, while the related expenses only increased slightly or even the significant improvement of financial expenses; The management expense rate in the current period was 14.12%, an increase of 0.67pct compared with the same period last year, mainly due to the fact that there was no social security relief in the reporting period, the salary of management personnel increased compared with the previous period, and the expenses of three categories of personnel increased. The R & D expense rate in this period is 5.36%, with a year-on-year decrease of 0.79pct. The company may have entered the stable period of R & D investment and is expected to enter the R & D income generation period.
2) in a single quarter, there are quarterly fluctuations in the production and delivery rhythm of the branch plant. It is recommended to pay attention to the annual performance. The revenue of 21q4 decreased by 12.73% year-on-year, 5.37% month on month, 7.49% year-on-year and 52.86% month on month. We believe that as a subsystem supporting manufacturer, the production and delivery rhythm of the company matches the rhythm of the main engine factory, showing a certain seasonality, which is a normal phenomenon. It is recommended to pay attention to the annual performance.
3) many indicators of contract liabilities and inventories in the balance sheet are better quarter by quarter, and the high growth in the coming year can be expected; The improvement of payment collection was superimposed on the increase of advance payment, and the cash flow was greatly improved. From the balance sheet, the orders are full, and the company is in the stage of stepping up production expansion, procurement and production. The company’s contract liabilities at the end of each period in 2021 were RMB 16 million, RMB 222 million, RMB 228 million and RMB 379 million respectively, which increased significantly and quarter by quarter compared with the end of 2020, mainly due to the increase of contract payments received in advance; The ending inventory was 685 million yuan, an increase of 68.72% over the beginning of the period, and maintained quarterly growth throughout the year. Referring to the annual report, it was prepared and put into production in advance according to the market orders. We believe that the company’s current orders are full, and many indicators in the balance sheet reflect that it is in the state of stepping up procurement and production; The prepayment at the end of the period increased by 435% compared with that at the beginning of the period, or it was caused by the increase of purchase money. The operating receipts increased and the company’s cash flow improved significantly. In 2021, the net cash inflow from operating activities was 321 million yuan, and the net outflow in the same period last year was 213 million yuan, mainly due to the increase of advance payment during the reporting period; At the same time, accounts receivable and short-term borrowings decreased at the end of the reporting period, the company’s cash flow improved significantly, and the financial expense ratio is expected to continue to improve.
The position of aviation airborne equipment in the subdivided field is prominent, benefiting from the acceleration of military aircraft reloading. The company’s aviation products support all military aircraft under research and in service and some civil aircraft. The number and structure of Chinese military aircraft have great room for improvement. It is estimated that the new market space of military aircraft will reach 650 billion yuan during the 14th Five Year Plan period (the calculation is based on the previous report [Anxin military industry] 2021 investment strategy, December 31, 2020). ① China’s only aviation oxygen system, airborne fuel tank inerting protection base, China’s largest aircraft auxiliary fuel tank manufacturer, benefiting from the acceleration of military aircraft loading and unloading; ② With the intergenerational upgrading of military aircraft, the new fuel tank inerting system has been added, and the value of other systems has also been improved. The supporting equipment is expected to increase both volume and price; ③ The maintenance market is also broad. The company expands the maintenance market of related products, which is expected to become a new growth point for the company’s future development; ④ Based on the advantages in the military field, it is expected to expand a broader civil aviation market in the future. Based on the above logic, we believe that the growth rate of the company’s aviation products will remain higher than that of the aviation equipment industry.
China’s leading manufacturer of special refrigeration equipment has a broader military and civilian market. In the military field, the company’s core technology has obvious advantages and a wide range of types. Its products mainly include shelter air conditioning, armor air conditioning, ship air conditioning, cold liquid equipment and other products, so as to realize the full military coverage of the air, land and sea rocket army. With the improvement of the penetration in the military field and the growth of the company’s market share, the refrigeration field is expected to contribute higher performance flexibility. The company develops civil special refrigeration equipment through the transformation of military technical achievements, and the market is broader.
The reform has achieved remarkable results, and the shareholding of the core management ensures the long-term development. From 2016 to 2021, the profit growth rate of the company was significantly higher than the revenue growth rate (the revenue was RMB 770 / 6.8 / 6.6 / 6.8 / 8.3 / 950 million respectively, and the net profit was RMB -0.1 / 0.6 / 0.7 / 1.1 / 1.9 / 230 million respectively). The net interest rate showed a trend of increasing year by year (the net interest rate increased by 25 PCT from 2016 to 2021), which was a result of the drastic reform of the company in the early stage, the implementation of personnel reduction, withdrawal from non core main business and many other measures, The company’s gross profit margin increased by 17 PCT and the superimposed expense rate improved by 11.5 PCT (including the R & D expense rate increased by 2.6 PCT). Secondly, the company introduced war investment and implemented employee stock ownership in 2018, and the core management has stock ownership. According to the announcement on the listing and circulation of restricted shares in the early stage, the main shareholders of the company agreed to promise not to transfer the company’s shares for 60 months from June 2018 in accordance with the capital increase agreement. The lock-in period is long, and the core management holds shares, with sufficient motivation for performance release.
Investment suggestion: considering the high prosperity of aviation equipment, the growth rate of the company’s aviation products is higher than that of the industry, the greater performance flexibility of the refrigeration business, and the remarkable results of the company’s early reform, we expect the company’s net profit from 2022 to 2024 to be 340 million yuan, 510 million yuan and 760 million yuan respectively, corresponding to PE of 25X, 17x and 11x. We continue to recommend and maintain “Buy-A”.
Risk tip: the progress of military aircraft replacement and train loading is not as expected, the competition pattern in the refrigeration field is deteriorating, and the civil aviation orders and domestic substitutes are not as expected
