\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 765 Avic Heavy Machinery Co.Ltd(600765) )
Event: the company released its 2021 annual report on March 14. In 2021, the company achieved an operating revenue of 8.790 billion yuan, a year-on-year increase of 31.23%, a net profit attributable to the parent of 891 million yuan, a year-on-year increase of 159.05%, and a net profit deducted from non attributable to the parent of 724 million yuan, a year-on-year increase of 166.60%. The basic earnings per share was 0.89 yuan / share, a year-on-year increase of 140.54%; The weighted average return on net assets was 11.05%, with a year-on-year increase of 5.58pct.
The revenue increased steadily, and the net profit growth continued to exceed expectations. On the revenue side, the forging and casting sector realized a revenue of 6.699 billion yuan, a year-on-year increase of 34.49%, of which the aviation business realized a revenue of 5.731 billion yuan, a year-on-year increase of 37.02%, and the non aviation business realized a revenue of 968 million yuan, a year-on-year increase of 20.95%; The revenue of the hydraulic environmental control sector was 2.091 billion yuan, a year-on-year increase of 21.78%, of which the revenue of the hydraulic business was 906 million yuan, a year-on-year increase of 10.35%, and the revenue of the heat exchanger business was 1.167 billion yuan, a year-on-year increase of 32.61%. On the profit side, the company realized a net profit attributable to the parent company of 891 million yuan, with a year-on-year increase of 159.05%. On the one hand, the company’s operating revenue increased significantly year-on-year and the gross profit margin increased steadily. On the other hand, the subsidiary Liyuan company sold 57.55% equity of Liyuan Hydraulic, and the consolidated statement profit increased by 140 million yuan.
Profitability continued to improve, and the ability to control expenses improved significantly. In 2021, the comprehensive gross profit margin was 28.33%, with a year-on-year increase of 1.69pct, and the net profit margin was 10.13%, with a year-on-year increase of 5.00pct. The company’s main products were sold in large quantities. The gross profit margin of aviation forging products increased by 0.86 PCT year-on-year, and that of hydraulic products increased by 8.87 PCT year-on-year. The scale effect led to the steady improvement of the overall profit margin. Compared with similar enterprises, the profitability of the company still has great room for improvement. During the period, the expense rate of the company was 13.17%, a year-on-year decrease of 3.04 PCT, of which the sales expense was 73 million yuan, a year-on-year increase of 6.01%, mainly due to the increase in the salary of sales personnel; The management fee was 657 million yuan, with a year-on-year increase of 10.55%, mainly due to the increase in the salary of managers and the cost of information construction; The financial expense was 81 million yuan, a year-on-year decrease of 36.26%, mainly due to the increase of interest income and the decrease of interest expenditure; The R & D cost was 346 million yuan, with a year-on-year increase of 17.47%. The company continued to increase investment in new product R & D, and its core competitiveness is expected to be further improved, thus promoting the continuous growth of industry position and market share.
Monetary capital increased significantly and contract liabilities increased significantly. At the end of 2021, the company’s monetary capital was 6.130 billion yuan, an increase of 100.84% year-on-year. On the one hand, a new round of private placement was completed in the current period, and the raised capital was 1.872 billion yuan. On the other hand, the company’s loan recovery increased significantly in the current period; The financing of receivables was 200 million yuan, a year-on-year decrease of 44.16%, mainly due to the endorsement of bank acceptance bills held by the company or the termination of recognition at maturity; The prepayment was 301 million yuan, an increase of 89.99% year-on-year, mainly due to the increase of prepayment for raw materials; The long-term equity investment was 731 million yuan, an increase of 88.02% year-on-year, mainly due to the fact that Liyuan Hydraulic was no longer included in the consolidated statements and the long-term equity investment increased by 363 million yuan. Contract liabilities amounted to 829 million yuan, with a year-on-year increase of 116874%, mainly due to the increase of customers’ prepayments.
Focus on the expansion of high-end military production capacity. At present, China’s advanced military aircraft and aircraft launch are in a large-scale stage. As the body structure and key parts of aircraft launch, the market prospect of military aviation forgings is broad. As the leader of China’s aviation parts forging, the company focuses on the main military industry, with sufficient orders on hand and the gross profit margin is expected to increase steadily. In 2021, the company introduced large die forging equipment through fixed raising and investment, expanded the production capacity of high-end and large integrated forgings, and Guizhou anda increased the production capacity of isothermal die forgings of special materials. It is expected that after the project is completed, the main business strength of the company is expected to be further strengthened.
China’s civil aviation and international subcontracting markets have opened up long-term growth space. At present, China has established a domestic civil aircraft pedigree composed of ARJ21, C919 and c929. With the accelerated mass production and delivery of domestic branch and trunk aircraft, the company, as one of the core suppliers of forgings, will expand the business scale of civil aircraft; The company has accelerated the promotion of international subcontracting business since 2015, and gradually has the strength to compete with international giants in technology and market. The international subcontracting market share is expected to increase steadily.
Investment suggestion: in view of the accelerated loading of China’s advanced fighters and the company’s performance in 2021, we adjusted the assumptions of operating income and gross profit margin in 202223 and raised the corresponding net profit attributable to the parent company. It is estimated that the operating income in 202224 will be 11.512 billion yuan, 15.098 billion yuan and 18.5 billion yuan respectively, with gross profit margin of 29.1%, 29.7% and 31.4% respectively, and the net profit attributable to the parent company will be 1.431 billion yuan RMB 1.862 billion and RMB 2.424 billion (the value before 202223 is RMB 1.410 billion and RMB 1.811 billion), EPS is RMB 1.36, RMB 1.77 and RMB 2.30, and the corresponding PE is 32.11x, 24.67x and 18.96x respectively. The leading position of the company is stable, the profitability continues to improve, the performance growth is expected to continue to exceed expectations, and maintain the “buy” rating.
Risk warning: military order fluctuation risk; The progress of international subcontracting business is less than expected; The scale effect of forging business is less than expected; The risk that the performance forecast and valuation judgment do not meet the expectations.
