\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 760 Avic Shenyang Aircraft Company Limited(600760) )
Event: the company released the first quarterly report of 2022. In 2022q1, the company achieved a revenue of 7.803 billion yuan, a year-on-year increase of + 34.78%, and a net profit attributable to the parent company of 511 million yuan, a year-on-year increase of + 48.18%, deducting a net profit not attributable to the parent company of 465 million yuan, a year-on-year increase of + 60.91%.
1. Income statement: the growth rate of revenue in 2022q1 exceeded expectations, and the net interest rate increased significantly by 3.9pct month on month. In terms of revenue, the company’s 2022q1 revenue grew by 34.78% year-on-year, an increase of 5.78pct compared with 29% disclosed in the previous performance forecast, exceeding expectations. In terms of profitability, 2022q1 company achieved a gross profit margin of 9.64%, with a year-on-year ratio of -0.31pct and a month on month ratio of + 0.05pct; The net interest rate was 6.55%, with a year-on-year increase of + 0.59pct and a significant increase of 3.9pct month on month. The main reason is that the expense rate during 2022q1 decreased by 0.92pct compared with 2021q1, in which the expense rates of sales, management, R & D and finance were -0.04 / – 0.11 / – 0.48 / – 0.29pct year-on-year respectively, reflecting the improvement of governance structure brought by the implementation of equity incentive. In addition, the company expects to achieve a revenue of 40.668 billion yuan in 2022, a year-on-year increase of + 19.3%, and a net profit attributable to the parent company of 2.124 billion yuan, a year-on-year increase of + 25.23%.
2. Balance sheet and cash flow statement: the accounts payable of 2022q1 company was 13.74 billion yuan, an increase of 41.64% over the end of the year, mainly due to the increase of procurement. The net operating cash flow was -2.461 billion yuan, mainly due to the decrease in customer loans received in the first quarter.
3. Strengthen the main business of maintenance and service support, and improve the aviation defense equipment industry chain. The company acquired 60% equity of Jilin airlines through cash of 157 million yuan and increased its capital with cash of 200 million yuan. After the capital increase, Avic Shenyang Aircraft Company Limited(600760) will hold 77.35% equity of Jilin airlines and become the controlling shareholder. Kyrgyzstan Airlines is mainly engaged in aviation defense equipment and engine, accessory repair of airborne department, spare parts manufacturing and other businesses. According to the announcement of the company, Avic Shenyang Aircraft Company Limited(600760) will accelerate the implementation of aviation maintenance support capacity-building project through Kyrgyzstan airlines, accelerate the construction and improvement of batch repair capacity, improve the integrated service support level for actual combat, meet the specific needs of different customers for aviation maintenance service support, and build a maintenance system for the whole life cycle of equipment. We believe that since the “14th five year plan” put forward comprehensive military training and war preparation, the use frequency of military aircraft, air launch, missiles and other weapons and equipment has increased significantly, and the loss of weapons and equipment is increasing rapidly. Avic Shenyang Aircraft Company Limited(600760) this acquisition of Jilin Airlines has completed the vertical extension of the aviation industry chain and promoted the establishment of a full value chain system with “design manufacturing maintenance service guarantee” as the core, It is conducive to the company’s further improvement of aviation equipment service support capability and operational performance.
The overall listing platform of Shenfei group is the only target of A-share fighter and the core asset of military industry with significant scarcity Avic Shenyang Aircraft Company Limited(600760) is subordinate to AVIC group. It completed major asset restructuring and achieved overall listing at the end of 2017. It has become the only listing platform for A-share fighters, with obvious scarcity. We believe that Avic Shenyang Aircraft Company Limited(600760) is one of the leading players in the military industry. The core logic is as follows:
1. Great certainty in steady growth of performance: the demand space of main military models is large, and the volume and price rise steadily. Industry perspective: the demand for “replenishment” and “quality improvement” of Chinese military aircraft is urgent. According to the statistics of world air force 2021: in terms of the total number, our army currently has 1571 fighter planes (accounting for 57.82% of the US Army); In terms of stock structure, our army lags behind 789 second-generation aircraft (accounting for 50.22% of the overall stock, nearly half). In contrast, the US Army has completely replaced all third-generation and above fighters. Our army has a great disadvantage of cross generational dimensionality reduction against the US Army. There is not only the demand for the increase of the total amount, but also the need for the upgrading and replacement of the stock.
Product perspective: under the background of “replenishment” and “quality improvement” of our military aircraft, the order growth of J-11 / 15 / 16, the main fighter of Shenyang airlines, will usher in. J-11 is the only heavy fighter among China’s three generations of fighters, benchmarking American F-15 and Russian Su-27; Shen Fei jian-15 / 16 is China’s three and a half generation fighter in active service, of which J-15 is the only aircraft carrier based aircraft in active service. J-16 is the core weapon for our air force to realize the strategic transformation of “both attack and defense”. It forms a high-low matching with Chengdu Fei jian-20 and is benchmarked with the fourth generation fighter F-35 of the United States.
From the perspective of Governance: the company has implemented equity incentive to boost efficiency and performance growth Avic Shenyang Aircraft Company Limited(600760) has implemented the equity incentive plan, which will stimulate the enthusiasm of the company’s management and employees and the company’s business vitality, help reduce costs, improve efficiency and control expenses. Its long-term and gradual realization process will make the incentive objects focus more on the long-term development of the company, which is of great significance to the steady development of the company.
2. The Avic Shenyang Aircraft Company Limited(600760) 14th five year plan: accelerate the upgrading of products, broaden the pedigree of aviation products, accelerate the optimization of industrial development layout, accelerate industrial integration and enhance the ability of value creation. “Production generation, development generation, pre research generation and exploration generation” is the R & D pattern of military products, which will drive the long-term growth of military industry. In 2021, the company invested 662 million yuan in R & D, with a year-on-year increase of + 130.34%. We believe that this is an important support for the company to expand its product pedigree by increasing financial investment and technical reserves for new products such as the fourth generation aircraft “Uighur Eagle” fc-31 and UAV business.
Investment suggestion: the landing of large advance receipts brings a high degree of certainty to the military industry. The technology of J-11 / 15 / 16, the main model of Shenyang aircraft in production, has become mature, and the profitability under batch loading is good. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.277 billion, RMB 3.009 billion and RMB 3.865 billion respectively, and the corresponding PE will be 43x, 33x and 25X. Taking into account the high certainty of Avic Shenyang Aircraft Company Limited(600760) order demand and the high certainty of profit improvement under the background of mass assembly, there will be fc-31 potential assembly products in the future, so the “buy” rating will be maintained.
Risk tip: the delivery rhythm of military products is lower than the market expectation.
