\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 372 China Avionics Systems Co.Ltd(600372) )
Professional integration and industrialization development platform of avionics system, the main supplier of avionics system in China
China Avionics Systems Co.Ltd(600372) is a professional integration and industrialization development platform of avionics system under AVIC group. It relies on its 10 holding subsidiaries to carry out production and business activities. Its business fields cover three major fields: Defense aviation, civil aviation and advanced manufacturing industry. Its product pedigree covers flight control system, radar system, photoelectric detection system, cockpit display and control system, airborne computer and network system, fire control system Ten systems, including inertial navigation system, atmospheric data system, integrated data system, control panel and dimming control system, and provide relevant supporting system solutions, products and services for advanced manufacturing fields such as electronic information, intelligent system, electromechanical automation and basic devices.
The reform of industrial structure accelerates the integration, and the company is expected to benefit from the professional integration of the platform
In 2018, AVIC airborne Systems Co., Ltd. was established, and its subordinate 14 enterprises and institutions are entrusted by the company, including 5 key scientific research institutes. With the in-depth promotion of the reform of state-owned enterprises, the company is expected to usher in the injection of high-quality assets. At the same time, the aviation industry has accelerated the integration of industrial chain, and has successively established 7 business departments, including 37 tertiary units (including all 10 subsidiaries of the company). We believe that the industrial chain may usher in a new pattern of global optimization, system development and supply chain integration, and the company is expected to benefit from the professional integration of airborne system platform.
Advance receipts + contract liabilities rose sharply, and the net interest rate of 22q1 reached 8.86%, a record high
At the end of 2021, the company’s advance collection + contract liabilities reached 1.432 billion yuan, a year-on-year increase of + 109186%, mainly due to the increase of host advance contracts; At the same time, the ending inventory was 6.112 billion yuan, a year-on-year increase of + 28.76%, indicating that the company is in the stage of active production preparation. We believe that the company has full orders on hand, the delivery of products may be accelerated, and the company’s performance is expected to enter the track of rapid growth. At the same time, relying on sufficient cash flow, the company may further improve its production and operation level, reduce financial expenses and continuously improve its profitability.
In 2021, the company achieved a revenue of 9.839 billion yuan, a year-on-year increase of + 12.49%, a net profit attributable to the parent company of 799 million yuan, a year-on-year increase of + 26.62%, and a period expense rate of 11.46%, a year-on-year increase of -1.93 PCTs; In 2022q1, the company achieved a revenue of 2.346 billion yuan, a year-on-year increase of + 19.60%, and a net profit attributable to the parent company of 201 million yuan, a year-on-year increase of + 44.37%. Due to the reduction of sales expenses and financial expenses, the expense rate during the period further decreased to 11.34%, reaching a record low. Affected by this, the company’s net interest rate at the end of 2022q1 was 8.86%, reaching a record high. We believe that with the gradual improvement of the company’s operation and management level and the further promotion of quality and efficiency improvement, the company’s profitability is expected to continue to improve; At the same time, with the subsequent expansion of product delivery scale, the company is expected to usher in the decline of marginal cost under the scale effect, and its profitability is expected to be gradually released on the basis of large volume.
The military civilian dual track resonance has been improved, and the avionics system industry has ushered in a period of rapid development
With the accelerated promotion of domestic large aircraft projects during the 14th Five Year Plan period and China’s demand for building a “strategic air force”, as the main supplier of China’s avionics system, the company is expected to usher in the improvement of the supporting value of single machine products, the demand of products and the penetration of product matching models at the same time. At the same time, superimposed on the back-end maintenance market brought by the increase of aviation product stock, the company may enter a rapid growth track.
Profit forecast and rating: we believe that as the main supplier of China’s avionics system, the company will fully benefit from the rapid volume of new generation aviation equipment and the gradual landing of domestic large aircraft projects during the 14th Five Year Plan period in the next three years. At the same time, the potential avionics back-end maintenance market may ensure the profitability of the company in the medium and long term. Under this assumption, it is predicted that the net profit attributable to the parent company from 2022 to 2024 will be RMB 969 / 1190 / 1459 million, corresponding to PE of 38.61/31.46/25.66x. The “buy” rating will be given for the first time, corresponding to the target price range of RMB 22.5-25.0/share.
Risk tips: increased market competition risk, military business fluctuation risk, operation risk, supply chain risk, technological innovation risk, quality control risk, and the risk that the production schedule of raised investment projects is less than expected.
