Jiangxi Hongdu Aviation Industry Co.Ltd(600316) (600316)
Event: on December 26, Hongdu Aviation Industry completed the annual production test flight task ahead of schedule, and the number of man hours completed in the whole year increased by 21% compared with 2020. More than 100 aircraft were transferred and delivered. Some aircraft models exceeded the annual batch production task, and a number of key research projects achieved breakthrough results.
Cradle of trainer, new leader of Defense: Jiangxi Hongdu Aviation Industry Co.Ltd(600316) is the main R & D and production base of trainer in China. It is the only enterprise in China that can develop primary, intermediate and advanced trainer and provide service support. At present, trainer includes CJ6, K8, L15, etc. In 2019, the company invested in Hongdu group’s missile business through asset replacement, and the company’s main business expanded to trainer + missile, etc.
With the accelerated loading of new aviation equipment and the reform of pilot training mode, the company’s higher education aircraft business is expected to accelerate growth: the main elements of the military combat effectiveness are people, weapons and equipment and the combination of people and weapons and equipment, and pilots are an important part of the advanced combat effectiveness of air forces. The pilot training mode of the Chinese air force has opened a new mode of “primary education aircraft directly on higher education aircraft”, and the importance of advanced training aircraft is highlighted. The company’s higher education aircraft L15 has typical characteristics of the third generation aircraft, with advanced digital flight control Telex system and integrated avionics system. Its performance has reached the world’s advanced level. It can be used to train pilots of the third and fourth generation aircraft, and has a high training efficiency cost ratio. China’s national defense and military construction continue to advance, new aviation equipment is expected to accelerate the assembly and upgrading, the demand for pilots will grow day by day, and the company’s higher education aircraft is expected to enter a period of accelerated growth.
Benefiting from the improvement of practical training level, the missile business is expected to grow rapidly: in recent years, the Central Military Commission has repeatedly emphasized strengthening practical military training and improving the training level and winning ability. For example, the No. 1 order of the Central Military Commission from 2019 to 2021 emphasizes strengthening practical training, and the No. 1 order of the Central Military Commission in 2022 emphasizes vigorously promoting the coupling of combat training. On June 24, 2021, when introducing the military training work of the whole army in the first half of 2021, the Ministry of National Defense said that all forces adhere to the practice of training troops with strong ability, and the ammunition consumption of the whole army has increased significantly compared with the same period in previous years. We believe that with the increasing frequency and intensity of practical training and the continuous improvement of combat readiness, the war training consumption and replenishment demand for missile consumables will continue to increase, and the company’s missile business is expected to usher in rapid growth.
The layout of trainer modification and stealth UAV is expected to open long-term growth space: according to the report of global network on November 20, 2019, the new generation of l-15b multifunctional fighter appeared at Dubai international air show. The model can be equipped with a variety of weapons and has strong air and ground combat capabilities. Referring to the situation that the T-50 higher education aircraft of L15 international competitor has been modified into fa-50 fighter and has been put into the actual combat deployment of the Korean Air Force, we believe that the company’s L15 modification has great development potential. According to the global times on September 27, 2021, a stealth UAV appeared at the Zhuhai Air Show. Unmanned is the development trend of weapons and equipment. According to the observer network report on October 22, 2019, the aircraft is produced by Hongdu company. We believe that it is expected to help the company open up long-term growth space in the future.
Profit forecast and investment rating: Based on the development prospects of the company’s trainer, missile and other businesses, we predict that the company’s net profit attributable to the parent company from 2021 to 2023 will be 303 million yuan, 455 million yuan and 599 million yuan respectively, EPS will be 42 million yuan, 63 million yuan and 83 yuan respectively, and the corresponding PE will be 93 times, 62 times and 47 times respectively. It will be covered for the first time and given a “buy” rating.
Risk warning: orders and product delivery are not as expected; The profit is less than expected; Market fluctuation risk.
