\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 893 Aecc Aviation Power Co Ltd(600893) )
The revenue in 2021 was + 19.10% year-on-year, and the profit inflection point in 2022 can be expected
The company released the annual report of 2021. During the period, the company achieved a revenue of 34.102 billion yuan, a year-on-year increase of + 19.10%, of which the revenue of aeroengine and derivatives business was 31.885 billion yuan, a year-on-year increase of + 21.87%. Profit side: in 2021, the company realized a net profit attributable to the parent company of RMB 1.188 billion, a year-on-year increase of + 3.63%. During the period, the product structure of the company was adjusted and the proportion of new products increased. Affected by this, the gross profit margin of the company’s sales during the period was 12.49%, year-on-year -2.48 PCTs, and the net profit margin of sales was 3.61%, year-on-year -0.46 PCTs.
In terms of period expenses: the sales expenses incurred during the period were 484 million yuan, a year-on-year increase of + 59.93%, mainly due to the increase of after-sales support tasks and the increase of sales service fees; The management fee was 1.884 billion yuan, a year-on-year increase of + 12.43%, mainly due to the reduction of social security relief and the increase of employee compensation; The R & D cost was 473 million yuan, a year-on-year increase of + 5.77%, mainly due to the increase of R & D tasks of self funded projects. The financial expense was 73 million yuan, with a year-on-year increase of – 76.11%, mainly due to the increase in advance payment from customers, abundant cash flow, increase in interest income and decrease in interest expenditure.
We believe that 2021 is the initial stage of large-scale delivery of some new engines. There is a gap between the maturity of new products and mature products with stable quality, which is the core factor causing the increase of operating costs and sales and maintenance expenses. As the new product gradually enters the mature and large-scale period, its yield and reliability will gradually improve (such as the reduction of product repair, the reduction of field support demand, etc.), the company’s operating cost and sales expense rate are expected to be improved, and the marginal cost will decrease under the scale effect after the new product climbs (including the reduction of allocation of fixed cost and the decrease of variable cost caused by manufacturing upgrading), The profitability of the company may enter the track of continuous improvement on the basis of large volume.
Contract liabilities + 675.35%, prepayment + 446.79%, and product delivery may be accelerated
Asset liability side: at the end of the period, the company’s contract liabilities reached 21.752 billion yuan, an increase of 675.34% compared with the amount at the end of the previous period, mainly due to the increase in the advance payment received from customers. We believe that the large advance payment at the downstream will ensure the smooth progress of the company’s expansion planning and new product development, and the company is expected to further improve quality and efficiency and enhance profitability by relying on sufficient cash flow; At the same time, the company’s advance payment at the end of the period reached 2.753 billion yuan, an increase of 446.79% compared with that at the end of the previous period, which is mainly due to the payment of the contract advance payment of supporting units, indicating that the company is in the stage of active production and preparation, and the delivery of the company’s products may be accelerated. At the same time, the large advance payment of Party A may have begun to be transmitted to the downstream. It is expected that the large advance payment will gradually fall to each subsystem unit and gradually extend to the upstream, The cash flow of the whole industry may have an inflection point, and various business indicators such as inventory turnover rate may be comprehensively improved.
The only supplier of engines for China’s military third-generation main combat aircraft, and the improvement of downstream demand during the 14th five year plan promoted the company’s performance growth
The company is the only enterprise in China that produces and manufactures all kinds of military aviation engines including turbojet, turbofan, turboshaft, turboprop and piston. It is also the only supplier of three generations of main combat engines in China. It is expected to fully benefit from the demand for existing batch production models. We believe that during the 14th Five Year Plan period, there may be a lot of demand for the main fighters represented by J-15 and j-16, driving the aero-engine front loading market into a high boom stage.
The demand for leapfrog weapons and equipment is urgent, and the new model pipeline is expected to be continuously confirmed in the medium and long term, driving the release of performance
Compared with the United States, the engines used by China’s fourth generation fighter aircraft have generation differences. The third generation engines represented by al-31 and F110 (thrust weight ratio is about 7 ~ 8) have been launched successively within 15-20 years after the delivery of the fourth generation engines represented by al-41 and F119 (thrust weight ratio is about 10). China’s third-generation engine “Taihang” was launched in 2005. We believe that thanks to the maturity of independent research and Development Experimental Platform and the accumulation of manufacturing technology, China’s fourth-generation turbofan engine is expected to enter the stage of mass production from 2023 to 2025.
According to the announcement of the company, the company now has the research and development ability of turbofan engine of fourth generation aircraft and large transport aircraft and the pre research ability of fifth generation aircraft, and has the complete scientific research and production ability of aeroengine manufacturing, assembly and commissioning. We believe that the demand for leapfrog development of national defense equipment during the 14th five year plan continues to increase. The fourth and fifth generation engines meet the development needs of China’s weapons and equipment. The development progress is expected to be further accelerated. After the approval, the company’s performance is expected to improve rapidly.
The continuous improvement of engine stock opens up the maintenance market space, and the company’s profit may be further thickened
We believe that benefiting from two major factors, the market capacity of aeroengine back-end maintenance will gradually increase: (1) the increase in the total number of stock aircraft caused by the increase in the demand for leapfrog weapons and equipment corresponds to the increase in the market capacity of back-end maintenance; (2) The actual combat training system was further deepened, and the flight intensity and movement difficulty increased, resulting in the reduction of maintenance time.
According to the company’s announcement, the company adjusted and expanded the repair capacity construction project in January 2018, adjusted the existing production layout, supplemented some key equipment, and built a new general assembly and repair plant and test plant to form a relatively independent and complete turbofan engine overhaul branch by integrating Aecc Aviation Power Co Ltd(600893) existing aircraft engine repair capacity. Therefore, we believe that with the gradual rise of the back-end engine maintenance market, the company’s corresponding maintenance business, engine parts sales and other high value-added businesses are expected to achieve further volume. Profit forecast: To sum up, we believe that the company, as a leading supplier of engines for main battle models in China, is in the process of accelerating product delivery
At the stage of large demand for existing models, pipeline for future models and steady growth of back-end maintenance market, the company has a good development trend in the short, medium and long term; The high economic growth of the current revenue side and the landing of new products deserve more attention. Due to the adjustment of the company’s product structure and the increase in the proportion of new products, we adjusted the company’s net profit attributable to the parent company from RMB 1.821/2.241 billion to RMB 1.608/2.091 billion from 2022 to 2023, and the net profit attributable to the parent company in 2024 was RMB 2.712 billion, corresponding to PE of 69.38/53.36/41.15x, maintaining the “buy” rating.
Risk warning: risk of supporting supply, risk of customer orders, risk that the launch of new models is less than expected, etc.
