\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 760 Avic Shenyang Aircraft Company Limited(600760) )
Event: the company issued the 2021 annual report and the announcement of pre increase of performance in the first quarter of 2022. In 2021, the company achieved a revenue of 34.088 billion yuan, a year-on-year increase of + 24.79%, and a net profit attributable to the parent company of 1.696 billion yuan, a year-on-year increase of + 14.56%; Deduct the net profit not attributable to the parent company of RMB 1.597 billion, a year-on-year increase of + 69.93%. The company expects to achieve a revenue of 7.468 billion yuan in 2022q1, a year-on-year increase of + 29%; The net profit attributable to the parent company was 509 million yuan, a year-on-year increase of + 47.5% and a month on month increase of + 110.33%; The net profit deducted from non parent company was 459 million yuan, with a year-on-year increase of + 58.67% and a month on month increase of + 108.64%.
1. Revenue scale: the growth rate of revenue in 2021 reached a new high in recent years. The estimated amount of related party transactions in 2022 shows that the delivery of military aircraft is expected to speed up again. Benefiting from the accelerated iteration and leap of military aircraft, the company’s revenue growth in 2021 reached the best level in recent 10 years (24.79%). In a single quarter, 21q1-q4 company achieved revenue of 5.79 billion yuan, 10.13 billion yuan, 9.0 billion yuan and 9.17 billion yuan respectively, and achieved balanced production except Q1. According to the estimated amount of related party transactions in 2022, on the one hand, the company expects to purchase 23.025 billion yuan of raw materials from related parties in 2022, a year-on-year increase of 33.36% over the actual amount in 2021, while Aecc Aviation Power Co Ltd(600893) expects to sell 18 billion yuan of goods to AVIC in 2022, a year-on-year increase of 28.05% over the actual amount in 2021, On the basis of the high base in 2021, the two main engine units still maintain a high growth rate, which once again verifies the high outlook of the military aircraft industry. On the other hand, the company expects to receive 3.321 billion yuan of labor services from related parties in 2022, an increase of 157.91% year-on-year compared with the actual amount in 2021, mainly due to the increase in demand caused by the increase in the number of tasks. Looking forward to 2022, with the acceleration of downstream delivery and the acceleration of production expansion in the upper and middle reaches, the upstream and downstream of the military aircraft industry chain are expected to achieve rapid development, and the revenue growth in 2022q1 is expected to be about 29%.
2. Profitability: the scale effect led to the continuous improvement of gross profit margin, the increase of R & D expenses and the reduction of government subsidies dragged down the net profit margin slightly. In 2021, the company achieved a gross profit margin of 9.76%, a year-on-year increase of 0.53pct, maintaining a growth trend. We believe that the continuous increase of gross profit margin is due to the scale effect brought by the increase of aviation equipment delivery. In 2021, the company achieved a net interest rate of 4.98%, a year-on-year decrease of 0.45pct, of which the net interest rate of 21q4 in a single quarter was only 2.65%, significantly lower than the annual average level. On the one hand, we believe that the company’s sales / management / Finance / R & D expense rate increased by 0.02/0.66/ -0.66/0.89pct year-on-year respectively in 2021, resulting in the company’s overall expense rate increased by 0.91pct year-on-year. The increase of sales expense rate is mainly due to the increase of exhibition expenses, the increase of management expense rate is mainly due to the increase of employee salary, the decrease of financial expense rate is mainly due to the increase of interest income, and the increase of R & D rate is mainly due to the increase of investment, Among them, the substantial increase in R & D expenses in the single quarter of 21q4 (an increase of 176.46% year-on-year in 20q4 and 123.26% month on month in 21q3) led to the company’s performance lower than expected and dragged down the annual net interest rate; On the other hand, the government subsidy included in the current profit and loss of the company in 2021 was 98 million yuan, a decrease of 329 million yuan compared with 2020. 2022q1 achieved a net interest rate of 6.82%, significantly higher than that of 2021q1-q4, which was 5.96%, 5.96%, 5.61% and 2.65%, laying a solid foundation for completing the annual delivery tasks with high quality.
3. The increase of contract liabilities indicates that there are sufficient orders on hand, and the year-on-year and month on month increase of inventories indicates that the revenue side will usher in high growth. At the end of 2021, the company’s contractual liabilities were 36.535 billion yuan, an increase of 672.50% over the end of 2020, indicating strong downstream demand and sufficient orders on hand; At the end of 2021, the company’s inventory was 8.79 billion yuan, a year-on-year increase of 13% compared with the end of 2020 and a chain increase of 33.83% compared with the end of the third quarter of 2021, indicating that the production and preparation efforts are increasing. Specifically, at the end of 2021, the company’s in-process products amounted to 6.895 billion yuan, an increase of 28.39% over the end of 2020, indicating a high growth in short and medium-term revenue.
4. Large advance receipts significantly improve the cash flow of enterprises and stimulate the industrial chain to expand production and speed up. In 2021, Avic Shenyang Aircraft Company Limited(600760) net operating cash flow was 10.095 billion yuan, a year-on-year increase of 59.73%, mainly due to the receipt of large advance receipts; The cash received from selling goods and providing labor services was 66.861 billion yuan, a year-on-year increase of 162.40%, indicating that the payment rhythm of customers is accelerating. According to the transmission of industrial chain, large advance receipts will significantly improve the operating cash flow of upstream and downstream enterprises. For example, Avic Electromechanical Systems Co.Ltd(002013) , Avic Heavy Machinery Co.Ltd(600765) 2021, the cash received from selling goods and providing labor services were 19.929 billion yuan and 7.759 billion yuan respectively, with a year-on-year increase of 85.18% and 45.22% respectively.
The overall listing platform of Shenfei group is the only target of A-share fighter and the core asset of military industry with significant scarcity Avic Shenyang Aircraft Company Limited(600760) is subordinate to AVIC group. It completed major asset restructuring and achieved overall listing at the end of 2017. It has become the only listing platform for A-share fighters, with obvious scarcity. We believe that Avic Shenyang Aircraft Company Limited(600760) is one of the leading players in the military industry. The core logic is as follows:
1. Great certainty in steady growth of performance: the demand space of main military models is large, and the volume and price rise steadily. Industry perspective: the demand for “replenishment” and “quality improvement” of Chinese military aircraft is urgent. According to the statistics of world air force 2021: in terms of the total number, our army currently has 1571 fighter planes (accounting for 57.82% of the US Army); In terms of stock structure, our army lags behind 789 second-generation aircraft (accounting for 50.22% of the overall stock, nearly half). In contrast, the US Army has completely replaced all third-generation and above fighters. Our army has a great disadvantage of cross generational dimensionality reduction against the US Army. There is not only the demand for the increase of the total amount, but also the need for the upgrading and replacement of the stock.
Product perspective: under the background of “replenishment” and “quality improvement” of our military aircraft, the order growth of J-11 / 15 / 16, the main fighter of Shenyang airlines, will usher in. J-11 is the only heavy fighter among China’s three generations of fighters, benchmarking American F-15 and Russian Su-27; Shen Fei jian-15 / 16 is China’s three and a half generation fighter in active service, of which J-15 is the only aircraft carrier based aircraft in active service. J-16 is the core weapon for our air force to realize the strategic transformation of “both attack and defense”. It forms a high-low matching with Chengdu Fei jian-20 and is benchmarked with the fourth generation fighter F-35 of the United States.
From the perspective of Governance: the company has implemented equity incentive to boost efficiency and performance growth Avic Shenyang Aircraft Company Limited(600760) has implemented the equity incentive plan, which will stimulate the enthusiasm of the company’s management and employees and the company’s business vitality, help reduce costs, improve efficiency and control expenses. Its long-term and gradual realization process will make the incentive objects focus more on the long-term development of the company, which is of great significance to the steady development of the company.
2. The Avic Shenyang Aircraft Company Limited(600760) 14th five year plan: accelerate the upgrading of products, broaden the pedigree of aviation products, accelerate the optimization of industrial development layout, accelerate industrial integration and enhance the ability of value creation. “Production generation, development generation, pre research generation and exploration generation” is the R & D pattern of military products, which will drive the long-term growth of military industry. In 2021, the company invested 662 million yuan in R & D, with a year-on-year increase of + 130.34%. We believe that this is an important support for the company to expand its product pedigree by increasing financial investment and technical reserves for new products such as the fourth generation aircraft “Uighur Eagle” fc-31 and UAV business.
Investment suggestion: the landing of large advance receipts brings a high degree of certainty to the military industry. The technology of J-11 / 15 / 16, the main model of Shenyang aircraft in production, has become mature, and the profitability under batch loading is good. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.277 billion, RMB 3.009 billion and RMB 3.865 billion respectively, and the corresponding PE will be 51x, 38x and 30x. Taking into account the high certainty of Avic Shenyang Aircraft Company Limited(600760) order demand and the high certainty of profit improvement under the background of mass assembly, there will be fc-31 potential assembly products in the future, so the “buy” rating will be maintained.
Risk tip: the delivery rhythm of military products is lower than the market expectation.
