\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 893 Aecc Aviation Power Co Ltd(600893) )
Event: the company released its 2021 annual report on April 8, with annual revenue of 34.1 billion, yoy + 19.1%; Net profit attributable to parent company: 1.19 billion, yoy + 3.6%; Deduct non net profit of 710 million, yoy – 19.1%. The performance is slightly lower than the market expectation. The main reasons are the decline of gross profit margin and the impact of impairment due to the adjustment of product structure. We believe that these factors will put pressure on the profitability of the company in the short term, but in the medium and long term, the company still has great flexibility.
The increase in the proportion of new products led to a short-term decline in gross profit margin. In 2021, the company’s overall gross profit margin was 12.5%, with a year-on-year decrease of 2.5ppt, mainly due to the impact of product structure adjustment; The net interest rate was 3.6%, with a year-on-year decrease of 0.5ppt, mainly due to the increase of expenses. In a single quarter, the company’s 2021q1 ~ q4:1) revenue was 3.74 billion, 6.34 billion, 8.26 billion and 15.76 billion respectively; 2) The net profit attributable to the parent company was 30 million, 430 million, 320 million and 400 million respectively. In terms of products, 1) revenue from aero engines and derivatives reached 31.88 billion yuan, yoy +21.9%, accounting for 93.5% of the total revenue, and the proportion has increased year by year since 2017 (accounting for 84%). The gross profit margin decreased by 2.9ppt to 12.0% year-on-year, due to the increase in the proportion of new products with low gross profit margin; 2) The export revenue of foreign trade was 1.29 billion, yoy-14.4%, mainly due to customers’ delay in picking up goods or cancellation of orders affected by the epidemic.
During this period, the cost rate has decreased for five consecutive years; The balance sheet reflects the high prosperity of the industry. In 2021, the company’s period expense rate was 8.6%, a year-on-year decrease of 1.0ppt, and decreased for five consecutive years (14.7% in 2017). Specifically: 1) the management fee rate is 5.5%, with a year-on-year decrease of 0.3ppt; 2) The after-sales service fee increased by 1.4 ppt year-on-year; 3) The financial expense ratio was 0.2%, with a significant year-on-year decrease of 0.9ppt; 4) The R & D expense ratio was 1.4%, with a year-on-year decrease of 0.2ppt. By the end of 2021, the company had: 5) accounts receivable and bills amounted to 16.64 billion, an increase of 52.6% over the beginning of the year; 6) The inventory was 20.5 billion yuan, an increase of 9.5% over the beginning of the year; 7) The prepayment was 2.75 billion yuan, an increase of 446.8% over the beginning of the year, which was due to the prepayment of supporting units; 8) Contract liabilities reached 21.75 billion yuan, an increase of 675.3% over the beginning of the year. The significant increase in receivables and contract liabilities reflects strong demand and the landing of prepayments for large orders.
The provision for impairment is the main reason affecting profits. The company made provision for asset impairment of 490 million yuan in 2021 and 470 million yuan in 2020, which had an impact on the current profit. The provision for impairment is to be fully included in the annual operating results: 1) the provision for receivables is 71.337 million yuan; 2) The inventory is withdrawn for 330 million yuan, of which 79.612 million yuan is withdrawn for the loss of value of raw materials due to design modification; 60.414 million yuan was withdrawn for semi-finished products and products in process due to product upgrading and structural adjustment; 180 million yuan of inventory is withdrawn due to product renewal and iteration; 3) The provision of 95.96 million yuan of entrusted loan is due to the bankruptcy proceedings of the subsidiary Jifa company, and the entrusted loan is expected to be uncollectible.
Investment suggestion: the company is the leader of China’s aeroengine and the only enterprise in China that can develop turbojet, turbofan, turboshaft, turboprop, piston and other full spectrum aeroengines. With the gradual increase of domestic aeroengines and the weakening of factors such as impairment after product maturity, the company’s performance has great flexibility. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 1.488 billion, RMB 2.096 billion and RMB 2.943 billion respectively. The current share price corresponds to PE of 75X / 53x / 38x from 2022 to 2024. For the first coverage, give a “recommended” rating.
Risk warning: product development progress is lower than expected; The production and delivery of products are not as expected
