\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 38 Aecc Aero-Engine Control Co.Ltd(000738) )
Event: the company announced on April 2 that in 2021, the operating revenue was 4.157 billion yuan (+ 18.25%), the net profit attributable to the parent company was 488 million yuan (+ 30.67%), the net profit not attributable to the parent company was 466 million yuan (+ 50.17%), the gross profit margin was 28.24% (- 0.80pcts), and the net profit margin was 12.39% (+ 1.77pcts).
Key investment points:
The profitability reached a new high and the cost reduction effect was remarkable
The growth rate of non parent company’s net profit was more than RMB 1.04 billion (+ 1.04 billion in 2024), and the net profit of non parent company’s net profit increased by more than RMB 1.04 billion (+ 6.74 billion in 2024), which remained at a new high of RMB 1.04 billion, and the net profit of non parent company’s net profit decreased by 6.75% in 2024. The gross profit margin was 28.24% (-0.80pcts), which decreased slightly; The net interest rate reached 12.39% (+ 1.77pcts), which was raised to the best level in history, and the profitability of the company reached a new high. Among them, the revenue of 2021q4 was 1.118 billion yuan (+ 3.84%), which was basically the same as that of the same period last year; The net profit attributable to the parent company was 90 million yuan (+ 113.80%), which doubled.
Aeroengine and gas turbine control system, fully participate in the development and production of aeroengine control systems of all models in service and under research in China; The income scale grew steadily, and the gross profit margin remained at a high level. International cooperation mainly provides foreign aviation enterprises with the production of civil aviation precision parts. Affected by the global epidemic, the gross profit margin has declined significantly. Non aviation and other businesses are mainly based on the core technology of power control system, focusing on weapons, automobiles and other fields, with steady growth in revenue and a slight decline in gross profit margin.
During the reporting period, the company’s period expense was 537 million yuan (- 4.92%), and the period expense rate was 12.91% (- 3.17 PCTs). The company achieved remarkable results in reducing costs. Among them, the management expense is 355 million yuan, and the management expense rate is 8.55% (- 2.39 PCTs). With the increase of revenue scale, the scale effect appears, and the management expense rate continues to decline, which is the lowest in recent ten years; The R & D investment is 151 million yuan (+ 4.09%), and the R & D expense rate is 3.65% (- 0.52pcts); The sales expense is 03 million yuan, and the sales expense rate is 0.70%, which is the same as last year; The financial expenses were 220000 yuan (- 97.53%), which decreased significantly with the implementation of contract liabilities and fixed increase raised funds.
Contract liabilities surged and inventories remained high. As of the end of the reporting period, the company’s contractual liabilities were 870 million yuan, an increase of 771 million yuan over the end of the previous year. The inventory was 1.098 billion yuan, which remained high, including 335 million yuan (+ 15.82%) for raw materials and 547 million yuan (+ 20.33%) for products in process, and the scale continued to increase; The inventory of goods is 227 million yuan (- 13.55%).
In addition, the company continues to downsize its staff, with the lowest number of employees in recent 10 years; At the same time, the staff structure was adjusted. During the reporting period, 147 technical staff were added and 107 production personnel were reduced.
According to the company’s forecast, the amount of products and commodities sold to related parties is expected to be 4.300 billion yuan (+ 30.30%) in 2022; The company expects a revenue of 5.100 billion yuan in 2022, with a growth rate of 22.68% compared with that in 2021.
RMB 4.298 billion has been greatly increased, and the operating performance of the subsidiaries of each raised investor has increased rapidly in 2021
On October 21, 2021, the company announced that the company’s fixed increase of 4.298 billion yuan was realized, and the issue price was 25.35 yuan / share, of which China Aviation Development subscribed 928 million yuan with assets, and the aviation development assets subordinate to aviation development group subscribed 900 million yuan in cash. The controlling shareholders and related parties continued to overweight, demonstrating their recognition of the company’s business. Other investors include the national military civilian integration Fund (700 million yuan), Guoxin Investment (600 million yuan), etc. The current round of fund-raising investment of the company is mainly used to comprehensively strengthen the capacity-building of four core subsidiaries of Xikong technology, Beijing aviation technology, Guizhou Honglin and Changchun control.
With the implementation of a number of policies such as major national aeroengine and gas turbine projects, the comprehensive planning for the development of military and civil engines will bring huge market space for aeroengine control system products. The current round of fixed growth of the company covers various scientific research and production capacity construction projects of the company and its subsidiaries, which helps to quickly and effectively connect the special tasks of “two machines”, supplement shortcomings and improve capacity. It will also effectively support the continuous expansion of the company’s business scale, improve the profitability of products and boost the high-quality development of the company.
The leading enterprise of aeroengine control system has deeply benefited from the upgrading and volume of weapons and equipment
The company is one of the core business segments of China Aviation Development Corporation. As a major research and production enterprise of aeroengine control system in China, the company is in a leading position in the subdivided field of aeroengine control system, accounting for more than 99% of the market. The company fully participates in the research and production of all models in service and under research in China, has industry-leading research technology and ability, and the subdivided fields belong to monopoly position.
With the implementation of major national aeroengine and gas turbine projects and the development of domestic civil aircraft, there is a huge market and business space for aeroengine control system products. The main sources of downstream growth include: 1) upgrading of some second-generation engines, improving the performance of third-generation engines, domestic power replacement of relevant models, and replacement of existing engines at the end of their service life; 2) The situation around China is complex, and the output of China’s high-performance Third-and-a-half and fourth generation aircraft needs to be appropriately increased; 3) New research models such as transport aircraft, bombers and new shipborne aircraft are in urgent demand, and will continue to invest in scientific research funds; 4) With the requirements of training practice, the increase of equipment use frequency, consumption and new aircraft maintenance promote the increase of maintenance business.
On the whole, the demand level and quantity of China’s military aircraft will increase significantly in the next few years. The high-quality development guided by technological upgrading and innovation will promote the upgrading of aviation equipment, which constitutes the industry trend in the future. Driven by demand and technology, the aeroengine industry has ushered in development opportunities. As the national team and leading enterprise of China’s aeroengine control system, the company will give priority to in-depth benefits.
Investment suggestions:
\u3000\u30001. The company’s operating revenue is 4.157 billion yuan (+ 18.25%), net profit attributable to parent company is 488 million yuan (+ 30.67%), net profit attributable to non parent company is 466 million yuan (+ 50.17%), the growth rate of revenue is a ten-year high, net profit attributable to parent company has maintained a growth rate of more than 30% for two consecutive years, and the growth rate of net profit attributable to non parent company is more than 50%; The profitability reached a new high and the cost reduction effect was remarkable
\u3000\u30002. The implementation of a large fixed increase of 4.298 billion yuan, the overweight of controlling shareholders, related parties and industrial funds, and the comprehensive strengthening of capacity-building will effectively support the expansion of the company’s business scale and the improvement of product profitability. The implementation subjects and core subsidiaries of four raised investment projects have achieved good operating performance in 2021.
\u3000\u30003. In the next few years, the demand level and quantity of China’s military aircraft will increase significantly. The high-quality development guided by technological upgrading and innovation will promote the upgrading of aviation equipment, which constitutes the future industry trend. Driven by demand and technology, the aeroengine industry has ushered in development opportunities. As the national team and leading enterprise of China’s aeroengine control system, the company will give priority to deeply benefit from the upgrading and large volume of weapons and equipment.
Based on the above point of view, we estimate that the company’s operating revenue from 2022 to 2024 will be 5.132 billion yuan, 6.314 billion yuan and 7.775 billion yuan respectively, the net profit attributable to the parent company will be 666 million yuan, 833 million yuan and 1.032 billion yuan respectively, and the EPS will be 0.51 yuan, 0.63 yuan and 0.78 yuan respectively. We give the target price of 31.42 yuan, corresponding to 62 times, 50 times and 40 times PE respectively.
Risk warning: the construction of scientific research and production capacity is not as expected; The epidemic continues to affect international cooperation.
