\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 38 Aecc Aero-Engine Control Co.Ltd(000738) )
Report summary
Aecc Aero-Engine Control Co.Ltd(000738) is a leading enterprise in China’s aviation engine control system, backed by China Aviation Development Group, and mainly has three business segments: engine control system and derivatives, international cooperation business, non aviation products and others. In 2020, the company’s four wholly-owned subsidiaries, Xikong technology, Guizhou Honglin, Beijing aviation technology and Changchun control, contributed 98.06% of the company’s operating revenue and 101.61% of its net profit.
Focus on the core business and steadily improve the profitability. In 2020, the company achieved an operating revenue of 3.499 billion yuan, a year-on-year increase of 13.14%; The net profit attributable to the parent company was 368 million yuan, a year-on-year increase of 30.68%; In the first half of 2021, the operating revenue reached 2.024 billion yuan, with a year-on-year increase of 25.00%, and the net profit attributable to the parent company was 296 million yuan, with a year-on-year increase of 26.71%. The operating efficiency was steadily improved. From the perspective of product classification, the company focuses on the main business of aeroengine control system and derivative products. In recent five years, the main business revenue has continued to account for about 80% or more of the company’s total operating revenue. In the first half of 2021, the demand for downstream military products was strong, the company’s large order payment was implemented, and the contract liabilities increased explosively, from 97 million yuan in 2020 to 895 million yuan, an increase of 825.52% over the end of the previous period. We believe that the company focuses on the main business, focuses on the core, optimizes the product structure, has sufficient orders on hand, and is expected to form a new economic growth point in the future.
The expectation of accelerated loading of military aircraft is strong, and policy support contributes to high growth. Aeroengine is an important part of the country and is known as the “pearl on the crown”. The country attaches great importance to the development of aeroengine industry. The aeroengine control system is the brain and nerve center of the engine, and its performance directly affects the performance of the aeroengine. Since the military reform, the company’s downstream key weapons and equipment in the fields of aviation, aerospace, electronics, weapons, shipbuilding and nuclear industry have planned large-scale and large-scale production. The upgrading of weapons and equipment has been accelerated, and the development of aeroengine and control system cannot wait. The company is in a leading position in China in the field of aero-engine control system. It will benefit from accelerating train assembly, upgrading of armed structure and domestic alternative triple drive, further improve the overall profitability and technical barriers, and consolidate the leading position of power control system.
The domestic substitution of civil aviation engines is imperative, and it is expected to break the performance “ceiling” for a long time. At present, civil aviation engines are mainly monopolized by the United States, Britain, France and Russia, while the development of civil aviation engines in China is in the stage of development and is gradually integrating into the world aviation industry chain. In recent years, China’s civil aviation market has grown rapidly. The state attaches great importance to the development of civil aviation industry, vigorously promotes the research and development of domestic civil aircraft such as C919 and ARJ21, and successively carries out in-depth industrial cooperation with world-class aviation manufacturing enterprises represented by complete machine assembly production. The future civil aviation market has a broad space, and domestic substitution is imperative. As a leading enterprise of China’s aviation power control system, the company directly benefits from the high demand traction and advanced technology drive of the future civil aviation engine. It is expected to deeply intervene in China’s civil aviation engine control system market, break the “ceiling” of performance growth and form a new performance growth point.
The customer base is solid, and the international cooperation business is expected to recover. In the future, the epidemic will be effectively controlled, the demand of civil aviation market will continue to expand, and the subcontracting production of civil aircraft and aeroengine parts will continue to grow. Global aero-engine giants have a very strict screening mechanism and operation process for the selection of subcontracting suppliers, and the company has long established long-term, stable and solid cooperative relations with well-known foreign aviation enterprises such as GE, Honeywell, RORO and Safran to provide them with subcontracting production of civil aviation precision parts, such as aeroengine rocker arm Manufacturing of slide valve coupling parts and other precision parts of flight control system and fuel system. At the same time, the company has industry-leading technology and irreplaceable cost control advantages, which lays a solid technical and cost foundation for the company to benefit from the stable growth of the subcontracting market in the future.
The digital electronic control system (FADEC) represents the future direction. With the continuous improvement of the performance requirements of aeroengine control system, the control system has developed from hydraulic mechanical control to full authority digital engine control (FADEC) system. FADEC has high precision, can reduce fuel consumption, realize fault-tolerant control, condition monitoring and engine over temperature, over rotation, surge and other functional protection, which represents the future development direction. As the main force in the development of China’s aeroengine FADEC system, China Aecc Aero-Engine Control Co.Ltd(000738) System Research Institute (614 Institute) has undertaken the tasks of most national key models, batch production and pre research in the industry, and has developed a variety of aeroengine FADEC systems for China. Relying on China aviation development, the company can complement the advantages of 614 Institute and jointly develop in the field of aeroengine control system to create synergy.
Profit forecast and investment rating: in the future, the company will focus on the core business of aeroengine and derivatives, further increase R & D investment, strive to break through key technologies and optimize product structure, and the company’s core competitiveness and profitability will continue to improve. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 481 million yuan, 669 million yuan and 912 million yuan, and EPS will be 0.37 yuan, 0.51 yuan and 0.69 yuan, corresponding to 63 times, 45 times and 33 times of PE, maintaining the “buy” rating.
Risk warning: military aircraft train loading is not as expected; The expansion of civil products business was less than expected.
