\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 893 Aecc Aviation Power Co Ltd(600893) )
Event: the company announced on April 9 that in 2021, the operating revenue was 34.102 billion yuan (+ 19.10%), the net profit attributable to the parent company was 1.188 billion yuan (+ 3.63%), the net profit not attributable to the parent company was 706 million yuan (- 19.05%), the gross profit margin was 12.49% (- 2.48 PCTs), and the net profit margin was 3.61% (- 0.46 PCTs).
Key investment points:
Revenue growth was steady, and product delivery was accelerated; The gross profit margin declined and the profit growth slowed down. In 2021, the operating revenue was 34.102 billion yuan (+ 19.10%), and the growth rate of revenue exceeded 19% for the first time since 2014; The net profit attributable to the parent company was 1.188 billion yuan (+ 3.63%), which was less than the growth rate of revenue. The gross profit margin was 12.49% (-2.48 PCTs) and the net profit margin was 3.61% (-0.46 PCTs), both of which fell to a certain extent; The net profit deducted from non parent company was 706 million yuan (- 19.05%), a year-on-year decline, mainly due to the increase of after-sales support tasks, the decrease of social security relief and the increase of period expenses.
In terms of gross profit margin, the business scale of the company has expanded, the product structure has been adjusted, the proportion of new products has increased, and the operating cost has increased rapidly; At the same time, direct materials accounted for 65.27% of the total cost in the operating cost, an increase of 2.18 PCTs. The price rise of raw materials may have a certain impact on the company’s gross profit margin.
The three expenses of the company changed greatly, with a decrease of 234 million yuan in financial expenses, an increase of 181 million yuan in sales expenses and 208 million yuan in management expenses. The sales expense was 484 million yuan (+ 59.93%), of which the sales service fee was 273 million yuan, an increase of 144 million yuan over the same period last year, and the sales expense rate was 1.42% (+ 0.36pcts); The management expense was 1.884 billion yuan (+ 12.41%), of which the employee salary increased by 139 million yuan compared with last year, mainly due to the reduction of social security relief, the amortization of intangible assets increased by 45 million yuan year-on-year, and the management expense rate was 5.52% (- 0.33pcts). The financial expense was 73 million yuan (- 76.22%), after receiving large contract liabilities, the company’s cash flow improved significantly, the loan decreased, the interest expense decreased by 113 million yuan year-on-year, the cash management increased, the interest income increased by 91 million yuan year-on-year, and the financial expense rate was 0.21% (- 0.86pcts).
The R & D cost is 473 million yuan (+ 5.77%), and the R & D cost rate is 1.39% (- 0.17 PCTs). Taken together, the period cost rate is 8.54% (-1.00pcts).
In terms of business, the operating revenue of aeroengine manufacturing and derivatives was 31.885 billion yuan (+ 21.87%), accounting for 93.50% of the revenue, and continued to focus on the main business; The operating income of foreign trade subcontracting production was 1.292 billion yuan (- 14.42%). Affected by the global epidemic and Sino US trade friction, a large number of foreign trade subcontracting were cancelled or postponed, and the foreign trade subcontracting business continued to shrink; The operating income of non aviation products and other businesses is 489 million yuan (- 17.55%). The traditional non aviation business is not competitive in the market and faces great pressure. The subsequent companies will adopt a contraction strategy for low value-added products.
From the perspective of subsidiaries, liming continued to grow steadily; Liyang and Nanfang increased their income without increasing profits, and their profit margins fell. The main products of Liming company are WS-10 series engines, which are widely equipped with many high-performance military aircraft in China. The operating revenue is 18.635 billion yuan (+ 17.05%), and the total profit is 563 million yuan (+ 18.17%), continuing the growth trend, with a profit margin of 3.02% (+ 0.03pcts). The main products of Nanfang company are turboshaft 8, turboprop 6 and piston engine, which are widely used in various types of helicopters. The operating revenue is 8.031 billion yuan (+ 11.70%), the total profit is 316 million yuan (- 9.02%), and the profit margin is 3.94% (- 0.90pcts). The main products of Liyang company are the third generation medium thrust aeroengines and other products. During the reporting period, the operating revenue was 3.020 billion yuan (+ 33.22%), the total profit was 57 million yuan (- 36.67%), and the profit margin was 1.88% (- 2.08 PCTs).
Multiple indicators show that downstream demand continues to increase
By the end of the reporting period, the company’s inventory was 20.515 billion yuan (+ 9.45%), including 14.689 billion yuan (+ 13.21%) of products in process, which remained high; Contract liabilities amounted to 21.752 billion yuan (+ 675.34%), with a year-on-year increase of 18.947 billion yuan; The amount of revenue corresponding to the performance obligations that have signed contracts but have not been performed or completed is 48.488 billion yuan, an increase of 13.478 billion yuan compared with last year; Of which, 20.761 billion yuan is expected to be recognized in 2022. In 2022, the company expects that the total related party transactions of commodities sold to subordinate units of AVIC group will be 18 billion yuan, an increase of 18.50% over the predicted value in 2021 and 28.05% over the actual value in 2021.
Aeroengine leading enterprises, short-term product structure adjustment affects profitability; The logic of long-term growth is clear
Aeroengine technology is the embodiment of great power status and comprehensive national strength. It is the strategic commanding point of modern aviation technology. It is not only an indispensable part of modern national defense, but also an important support for economic and social development. Externally, there is still a gap between China’s aeroengine development capacity and the world’s advanced level. The development level of aeroengine lags behind the development demand of aviation equipment and cannot fully meet the demand of military and civilian market. The international pattern of aeroengine industry has not fundamentally changed. From the perspective of China, China’s aviation power equipment will form a situation of accelerated elimination of the first and second generation aircraft, stable batch delivery of the third generation aircraft, development of the fourth generation aircraft and accelerated pre research of the fifth generation aircraft, which provides a good opportunity for the development of the company’s military aeroengine products.
The company 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. Internationally, the company is one of the few enterprises that can independently develop aeroengine products. The company has a complete set of technology covering the design, manufacturing, final assembly and commissioning of the product life cycle and the ability to provide comprehensive engine services; Have the ability of general assembly and test run of first, second and third generation aeroengines and gas turbines and the ability of trial production of fourth and fifth generation aircraft.
The company has a large market share and high brand recognition. Due to the long product development cycle, difficult technology and high investment cost, the growth of the company needs a certain period. However, the company will maintain a long-term sustained and stable growth trend. In the long run, with the continuous upgrading of the company’s product structure and the continuous improvement of personnel structure, it will effectively promote the continuous improvement of the company’s economic operation quality.
Investment suggestions:
Aeroengine technology is the embodiment of China’s status as a big country and comprehensive national strength. From the trend of China’s aviation power equipment, it will form a situation of accelerated elimination of the first and second generation aircraft, stable delivery of the third generation aircraft in batch, development of the fourth generation aircraft and accelerated pre research of the fifth generation aircraft. The company is the only military aeroengine development and production enterprise in China, and the only listed platform company of aviation power under AVIC, which will usher in a period of development opportunities.
We estimate that the company’s operating revenue from 2022 to 2024 will be 40.290 billion yuan, 48.130 billion yuan and 57.535.6 billion yuan respectively, the net profit attributable to the parent company will be 1.307 billion yuan, 1.507 billion yuan and 1.839 billion yuan respectively, and the EPS will be 0.49 yuan, 0.57 yuan and 0.69 yuan respectively. We maintain the buy rating.
Risk warning: the adjustment of product structure is not as expected; The epidemic continues to affect international cooperation.
