\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 893 Aecc Aviation Power Co Ltd(600893) )
Event: the company released its annual report for 2021, which realized revenue (34.102 billion yuan, + 19.1%), net profit attributable to the parent company (1.188 billion yuan, + 3.63%), and net profit not attributable to the parent company (706 million yuan, – 19.05%).
1. Revenue scale: the revenue growth of aeroengine business is the best level in recent 10 years. The related party transactions and business objectives in 2022 show that the delivery of aeroengine is expected to speed up again. Benefiting from the stable delivery of third-generation aircraft in batches, the company achieved revenue in 2021 (34.102 billion yuan, + 19.1%), including revenue from aviation development and derivatives (31.885 billion yuan, + 21.87%), which was higher than the growth rate of the company’s overall revenue and further increased to 93.5%.
Specific to subsidiary level:
1) Liming company: achieved revenue (18.635 billion yuan, + 17.05%), total profit (563 million yuan, + 18.17%), including revenue from aviation development and derivatives business (18.12 billion yuan, + 17.53%).
2) Nanfang company: realized revenue (RMB 8.031 billion, + 11.7%) and total profit (RMB 316 million, – 9.02%); Among them, the revenue of aviation development and derivatives business (RMB 7.758 billion, + 11.06%).
3) Liyang company: realized revenue (3.02 billion yuan, + 33.22%) and total profit (57 million yuan, – 36.67%); Among them, the revenue of aviation development and derivatives business (2.916 billion yuan, + 35.72%), and the decline in profit was mainly due to the decrease in gross profit margin caused by the increase in the delivery of new products, and the decrease in the equity value of Bank of Guizhou, resulting in the change in fair value income of – 28 million yuan.
The total revenue of Xi’an Airlines was RMB 1.4 billion (RMB 2.907 billion), + 2.907 billion (RMB 2.907 billion). The decline in profits was mainly due to the adjustment of product structure and the increase in the proportion of new products.
The prospect of revenue and profit in 2022, the growth rate may be further improved, and the aviation development industry chain will maintain high growth and high outlook, which comes from:
1) performance plan for 2022: it is expected to achieve a revenue of 38.429 billion yuan, an increase of 20.85% over the predicted revenue of 2021 and 12.69% over the actual revenue of 2021; The net profit attributable to the parent company is expected to reach 1.259 billion yuan, an increase of 4.92% year-on-year compared with the predicted net profit attributable to the parent company in 2021. In 2021, the company achieved revenue of 31.885 billion yuan for air launch and derivative products, with a year-on-year increase of 21.87%, mainly due to the stable batch delivery of third-generation aircraft. It is expected to achieve revenue of 36.27 billion yuan in 2022, with a year-on-year increase of 21.3% compared with the expected revenue in 2021 and 13.75% compared with the actual revenue in 2021; In 2021, the company’s foreign trade export subcontracting business achieved a revenue of 1.292 billion yuan, a year-on-year decrease of 14.42%, mainly due to the reduction of the scope of consolidation and the delayed delivery or cancellation of orders by customers affected by covid-19 epidemic. It is expected to achieve a revenue of 1.471 billion yuan in 2022, a year-on-year increase of 13.15% compared with the expected revenue in 2021 and a year-on-year increase of 13.87% compared with the actual revenue in 2021; In 2021, the company’s non aviation products and other products achieved revenue of 489 million yuan, a year-on-year decrease of 17.55%, mainly due to the decrease of material sales revenue of industrial and trade subsidiaries. It is expected to achieve revenue of 292 million yuan in 2022, a year-on-year decrease of 2.79% compared with the expected revenue in 2021 and a year-on-year decrease of 40.35% compared with the actual revenue in 2021.
2) related party transactions in 2022: in 2022, the company expects to sell goods and provide labor services to related parties to be 20.725 billion yuan, an increase of 26.98% over the estimated amount at the beginning of 2021 and 25.87% over the actual amount in 2021.
3) the large amount of contract liabilities shows that there are sufficient orders on hand, with a high degree of certainty, the release of industrial chain capacity and the improvement of process yield, which is expected to accelerate the delivery and revenue growth of products in 2022. At the end of 2021, the company’s contract liabilities were 21.752 billion yuan, an increase of 675.34% year-on-year over the beginning of the period, indicating that there were sufficient orders on hand; In 2021, the net operating cash flows of Aecc Aviation Power Co Ltd(600893) , Aecc Aero-Engine Control Co.Ltd(000738) and Aecc Aero-Engine Control Co.Ltd(000738) were 16.704 billion yuan and 894 million yuan respectively, with a year-on-year increase of 362.9% and 111.49% respectively. The payment trend of the whole industrial chain was good.
2. Profitability: at present, it is in the stage of process yield climbing and new model R & D. in the medium and long term, the profitability will be improved under the scale effect. In 2021, the company achieved a gross profit margin of 12.49%, a year-on-year decrease of 2.48 PCT, and a net profit margin of 12.49%, a year-on-year decrease of 0.46 PCT.
1) the main reason for the decline of profitability in 2021 is that the process maturity of new batch models is in the climbing stage. In 2021, the gross profit margin of the company’s aviation and derivative products was 11.95%, a year-on-year decrease of 2.86pct, mainly due to the adjustment of product structure and the increase of the proportion of new products; From the cost side, the increase in the proportion of new products has led to an increase in the investment in new materials and new processes, resulting in a year-on-year increase of 27.13% in the cost of direct materials in 2021, higher than the growth rate of overall revenue; From the perspective of sales expenses, due to the problem of process maturity, the after-sales support tasks are increased, resulting in a year-on-year increase of 59.93% in sales expenses in 2021, which is significantly higher than the growth rate of overall revenue.
2) looking forward to the future: Although the continuous investment in the development of new products of Hangfa will erode part of the profits, the increase in the proportion of batch production models, the increase in the yield rate and the superposition of scale effect will bring the overall profitability upward. Although the continuous development of new products of Hangfa erodes part of the profits, it also shows that the product pipeline is rich and the driving force for long-term sustainable growth is strong; Moreover, the third generation machine is the current main model, which is in the stage of batch stable delivery, and the yield will continue to improve. The scale effect is reflected in: driven by the increase of delivery volume, promoting the transfer of non core businesses such as standard parts under the idea of “small core and large cooperation”, making the core business more focused; Thus driving the improvement of overall profitability.
Industry: aeroengine is a track worthy of long-term gold digging: in a strategic sense, military aeroengine is the mainstay of aviation power, and commercial aeroengine is the crown pearl of manufacturing power. From the perspective of investment, the aviation development industry has five characteristics: large enough space, long enough track, long enough product application cycle, high enough barriers and good enough industrial pattern.
1. The space is large enough and the track is long enough: the three-dimensional dimensions of military aviation, commercial aviation and aviation maintenance shape the space for the rapid development of aviation industry. We expect that the overall market space of China’s aviation industry will exceed 100 billion yuan in the next seven years.
2. The product application cycle is long enough: the development of Hangfa has the characteristics of high investment and high return. Once the development is successful, the application cycle of the product is long, a mature product can be sold for 30 ~ 50 years, and the threat of competition is very small. The manufacturer can enjoy the benefits brought by the upgrading of technology and industrial chain at ease; In particular, a series of models derived from core opportunities will enrich the application cycle of products.
3. The barrier is high enough and the industrial structure is good enough: the technical barrier of aeroengine is high enough that there is a minority oligopoly in the world. Internationally, Aecc Aviation Power Co Ltd(600893) is also one of the few enterprises that can independently develop aeroengine products.
Company: Aecc Aviation Power Co Ltd(600893) as the only listed company for the general assembly of military aero-engines in China, it will fully benefit from the high certainty and long-term nature of the high growth of China’s aviation development track Aecc Aviation Power Co Ltd(600893) is the only enterprise in China that can develop a full spectrum of military aeroengines such as turbojet, turbofan, turboshaft, turboprop and piston. It is the only platform for the overall listing of aviation power under AVIC. The landing of large advance receipts has directly locked in the high prospect of high certainty in the next few years. We expect that the “14th five year plan” Aecc Aviation Power Co Ltd(600893) will enter a period of rapid growth.
Investment suggestion: we expect the net profit attributable to the parent company in 20222024 to be RMB 1.426 billion, 1.782 billion and 2.33 billion respectively, and EPS to be RMB 0.53, 0.67 and 0.87 respectively, with corresponding valuations of 78x, 63x and 48x, maintaining the “buy” rating.
Risk warning: military orders are less than expected; The development process of the new aircraft model was lower than expected.
