\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 96( Chengdu Ald Aviation Manufacturing Corporation(300696) )
Event: the company released the annual report of 2021 on April 20. In 2021, the operating revenue was 614 million yuan (+ 102.12%), the net profit attributable to the parent was 255 million yuan (+ 86.47%), and the net profit not attributable to the parent was 249 million yuan (+ 87.70%); The gross profit margin is 56.63% (- 12.63 PCTs) and the net profit margin is 41.53% (- 3.48 PCTs); In 2022q1, the revenue was 177 million yuan (+ 63.10%), and the net profit attributable to the parent company was 66 million yuan (+ 40.95%).
Key investment points:
The revenue doubled and the growth rate of net profit attributable to the parent company reached the best level in history: during the reporting period, the company achieved an operating revenue of 614 million yuan (+ 102.12%), the growth rate of revenue was brilliant and doubled, with a compound growth rate of 38.86% in the past five years. Benefiting from the accelerating process of aviation equipment construction, the demand for downstream orders has increased significantly, and the scale of revenue has increased rapidly. The net profit attributable to the parent company was 255 million yuan (+ 86.47%), and the net profit not attributable to the parent company was 249 million yuan (+ 87.70%), with the growth rate reaching the best level in the same period since the listing. The gross profit margin was 56.63% (-12.63 PCTs) and the net profit margin was 41.53% (-3.48 PCTs), with a significant decrease. We believe that the decline in gross profit margin is due to the combination of multiple factors such as business model transformation, income structure change and product price reduction. During the reporting period, the company began to undertake the whole process business from raw material procurement to component assembly. Compared with the parts processing business under the previous incoming processing mode, the company will purchase some raw materials and related accessories by itself under the new business mode. The cost of raw materials (78 million yuan, + 358.95%) increased significantly. Although in the short term, the change of business mode has an impact on the gross profit margin of the company, However, we should pay more attention to the future development trend and pattern of the company. Through the in-depth development from parts processing to component assembly, the company has not only improved its industrial chain layout under the new business model, but also further improved the supporting level and industrial chain position of the company, and the revenue volume and profit scale are expected to enter a new level.
In terms of expenses, the company’s three fee expense rate was 3.40% (- 4.01pcts), with a significant decrease, the management expense rate was 3.48% (- 3.86pcts), and the share based payment expenses amortized by the company during the reporting period (RMB 3.6099 million, – 60.62%) were reduced. At the same time, thanks to the optimization of the company’s business strategy for many years, the management efficiency was significantly improved and the expense rate decreased significantly. The sales expense rate is 0.14% (-0.05pcts). Because the company mainly sells military products, the sales expense rate is always relatively low due to the particularity of military procurement. The financial expense rate is -0.21% (-0.10pcts). The availability of funds raised by private placement will help the company optimize its capital structure and further reduce its financial expenses.
In terms of R & D expenses, the company’s R & D expenses in 2021 were 169037 million yuan (+ 53.99%), significantly higher than that in the same period of the previous year. During the reporting period, the company continued to increase investment in technology R & D, test and testing. So far, the company has 36 patents, including 3 invention patents and 33 practical new types. Another 12 invention patents and one utility model are under examination. In terms of major R & D projects, during the reporting period, seven R & D projects, including the development of CNC universal adapter fixture, precision hole processing technology and NC lathe processing multi-functional turning tool head, have been completed, which has helped to further improve the processing efficiency and cost control effect. In terms of cash flow and other data, during the reporting period, the net cash flow generated by the company’s operating activities (246 million yuan, + 114024%) increased significantly, and the collection and income quality further improved, which is reflected in the turnover rate of accounts receivable and credit impairment loss. During the reporting period, the turnover rate of accounts receivable (1.68, + 15.86%) increased, and the credit impairment loss (8.4387 million yuan, – 9.40%) improved, It further shows that the company’s collection strength and operation capacity are continuously strengthened. During the reporting period, the construction of the company’s aviation parts intelligent manufacturing and system integration center was carried out in an orderly manner, the construction in progress (65 million yuan, + 785.50%) was nearly eight times higher than that at the beginning of the period, and the procurement of production equipment (32 million yuan, + 425.77%) increased significantly, indicating that the company’s production expansion continued to advance steadily.
In the first quarter, the revenue and profit reached a new high and continued the high trend: the company realized a revenue of 177 million yuan (+ 63.10%) in 2022q1 and a net profit attributable to the parent company of 66 million yuan (+ 40.95%). The company continued the high trend of last year in the first quarter, and the revenue and profit were the best data in the same period in history. Net profit margin 37.29% (- 6.23pcts) we believe that considering that the company still continues to promote the whole process manufacturing business from raw materials to component assembly, under this business mode, the purchasing intensity of raw materials is significantly increased, and the cost side is significantly higher than the parts manufacturing business under the previous incoming processing mode, which has a certain impact on the level of net profit margin.
In 2022q1, the company’s credit impairment loss (124427 million yuan, + 231.94%) increased significantly, mainly due to the growth of the company’s main business and the increase of accounts receivable in the first quarter. Considering that the company’s accounts receivable mainly come from military enterprises, such customers have strong performance ability and good credit, and rarely form substantive bad debts, which is expected to be reversed in the future. If the new credit impairment loss (8.6943 million yuan) in the first quarter is reversed, The net profit attributable to the parent company was 75 million yuan (+ 58.92%), the growth rate further increased, and the net interest rate increased from 37.29% (- 6.23 PCTs) to 42.2% (- 1.32 PCTs), with a significant slowdown.
Consolidate the foundation of advantages, stabilize core resources and open up business space
① CNC machining
The company’s CNC precision machining business mainly focuses on the processing and manufacturing of key parts, important parts and complex parts of aviation parts. The downstream covers a variety of military aircraft, civil aircraft parts, engine parts and aerospace large structural parts. At present, the company is the largest private supplier of a main engine factory subordinate to the aviation industry, and the supplier with the largest proportion of key, important and complex parts.
On the basis of the existing mature and stable process, the company started from the process and technology innovation, overcome the existing defects, and further improved the processing efficiency and stability. The product yield reached more than 99.6%. It is in an advantageous position in the industry in terms of high-precision blind hole processing and complex deep cavity processing of titanium alloy, high-strength steel and other materials. During the reporting period, the company was once again awarded the “gold supplier” of aircraft manufacturing unit under AVIC, And the honor of “excellent supplier” of Chengfei civil aircraft.
In terms of capacity planning, the aviation parts intelligent production line of Xindu Aviation Industrial Park mainly focuses on the processing and manufacturing of aircraft structural parts and rotary parts. After the production line is completed, it is expected to achieve an annual production capacity of 35000 aviation parts. It has been successfully put into production in September 2021, gradually releasing the NC capacity; The intelligent manufacturing center of aviation parts and components has been carried out in an orderly manner as planned. During the reporting period, the construction of the main structure has been completed and the procurement of main equipment has been started. The completion progress of the project has reached 17.25%, and it is expected to be put into operation in early 2023.
After the completion of the project, the existing production capacity of the company will be greatly improved, and the new production capacity is expected to be 1.232 million man hours / year.
② special process treatment
At present, the company has more than 10 kinds of special processes and physical and chemical test capabilities, such as anodic oxidation, nondestructive testing, pickling and heat treatment. It is one of the few private enterprises in the industry with the whole process of special processes for aviation structural parts. During the reporting period, the company has undertaken a number of special process businesses of military and civil aircraft models, as well as special process processing of aeroengine and Avionics related products.
As the only strategic partner in the field of heat treatment of a main engine factory subordinate to the aviation industry, in addition to some machine processing products undertaken by itself, the company also covers the special process processing business of other customers in the aviation manufacturing field, including the main engine factory and its outsourced machine processing products, as well as Shaanxi airlines, Aecc Aero Science And Technology Co.Ltd(600391) etc.
On the basis that the special process business has established a perfect and stable control system, the company continues to increase technology research and development. During the reporting period, the company has realized domestic substitution, including the coating process of ARJ landing gear parts. In terms of capacity planning, the company expects to expand the special process capacity by increasing key equipment and optimizing process schemes, and the ceiling of business growth is expected to rise further.
Highlight the advantages of whole process manufacturing and help the company cut into the core competence link
As a high-quality enterprise with core key technologies, equipment and high quality control level, the company has formed the whole process manufacturing capacity from NC precision machining to component assembly. During the reporting period, the company completed the assembly of components in the complex central section of a certain UAV and the overall delivery of the fuselage section of the aircraft.
As the first supporting unit to promote the whole process business of “raw materials – CNC precision machining – special process processing – assembly of components” among the four component assembly units determined by a main engine factory, the company has realized the self procurement of designated raw materials and components / accessories in its international direct business and part of the whole assembly process business.
Although at this stage, due to the downward expansion of the company’s business to the whole process manufacturing mode, the product structure is in the stage of dynamic change and the profitability is under short-term pressure, we should pay more attention to the future development orientation and pattern of the company. Compared with the general parts machining process, Department / component assembly is the general link of the industrial chain, and the company relies on the in-depth development extending from NC machining to department component assembly, Achieve effective coordination with the internal and external departments of the main engine plant, further break the limitations of the original manufacturing capacity, complete the transformation and upgrading strategy of paying equal attention to the “three legs” of precision manufacturing of key and important parts, special technology and assembly of components, and lay a good foundation for further improving the supporting level of follow-up business.
Investment advice
We believe that the company focuses on the field of aerospace manufacturing. At present, its main business covers three parts: NC precision machining, special process processing and component assembly of aviation parts. It has the whole process manufacturing ability of aviation parts and has strong core competitiveness. The specific views are as follows:
① since 2005, the company has entered the field of precision machining and manufacturing of aviation parts. After years of technology accumulation and strict quality control, the product yield has reached more than 99.6%. Orderly promotion of capacity planning to further enhance core competitiveness;
② at present, the company has more than 10 kinds of special processes and physical and chemical test capabilities. It is one of the few private enterprises in the industry that have the whole process of special processes for aviation structural parts. In the future, it is expected to expand the production capacity of special processes by increasing key equipment and optimizing process schemes, and the ceiling of business growth is expected to rise further;
③ relying on the in-depth development from CNC machining to component assembly, the company realized effective coordination with the internal and external parts of the main engine factory, further broke the limitations of the original manufacturing capacity, completed the transformation and upgrading strategy of focusing on the “three foot” of precision manufacturing of key and important parts, special technology and component assembly, and laid a good foundation for further upgrading the supporting level of subsequent business. Based on the above point of view, we estimate that the company’s operating revenue from 2022 to 2024 will be 845 million yuan, 1149 million yuan and 1521 million yuan respectively, the net profit attributable to the parent company will be 343 million yuan, 459 million yuan and 597 million yuan respectively, and the EPS will be 404 million yuan, 1879 million yuan and 2445 yuan respectively. We maintain the “buy” rating, and the target price will be 61.1 yuan, corresponding to 44 times, 33 times and 25 times PE respectively.
Risk tip: the R & D Progress of product projects is less than expected, and the macro environment is depressed.
