AVIC Shen Fei (600760): The growth of the first three quarters exceeded expectations and the growth of the fighter leader shines

Event: The company released the third quarter report of 2019, and achieved operating income of 158 in the first three quarters.

900,000 yuan (ten years +37.

1%), net profit attributable to mother 6.
.

200,000 yuan (ten years +98.

4%), with a budget benefit of 0.

44 yuan / share.

Comments: (1) The company achieved operating income of 158 in the first three quarters.

90 trillion, a big increase of 37 in ten years.

1%, mainly due to the increase in the company’s product sales and delivery and the production rhythm is more balanced compared to the same period last year.

Q3 achieved operating income of 46.

0.6 billion, down 13 each year.

7% is 武汉夜生活网 definitely not the reason for the order. It was due to the different pace of delivery during the reporting period compared to the same period last year. (2) The company achieved net profit attributable to its mother in the first three quarters.

2 billion yuan, a year-on-year increase of 98.

4%, the initial growth rate of net profit attributable to mothers is higher than the growth rate of revenue: a) gross profit margin in the first three quarters of 8.

8%, rising by 1 every year.

1pct, the growth rate crack; b) the first three quarters of the management expense ratio decreased slightly.

7pct, mainly due to the decrease in other management expenses in Q1 of 2018, which led to the breakdown of the management expense ratio base in the first three quarters of 2018; c) The financial expenses in the first three quarters decreased by 14.75 million yuan from the same period last year, mainly due to the decrease in index expenditures; d) Other earnings in the first three quarters increased by 131 each year.

6%, mainly due to increased government subsidies.

Q3 realized net profit attributable to mother 1.

9 trillion, down 10 a year.

9%, mainly due to the year-on-year decline in Q3 operating income.

(3) In terms of other expense ratios, the company’s R & D expense ratio in the first three quarters increased by 0 compared with the same period last year.

3 points, mainly due to the increase in R & D investment; the sales expense ratio in the first three quarters was the same as the same period last year.

(4) In terms of assets and liabilities, a) accounts receivable, the end of the period increased by 41 compared with the beginning of the period.

0%, mainly due to the increase in product sales revenue; b) accounts payable, which increased by 36 at the end of the period compared with the beginning of the period.

7%, mainly due to increased procurement.

(5) In terms of cash flow, the net cash flow from operating activities was zero in the current period.

600 million, -11 in the same period last year.

6 trillion, mainly due to the increase in payment received in this period.

National strategies and policies have pushed the aviation defense equipment industry to a new height.

Aviation defense equipment needs originate from national defense security requirements, national strategic needs for industry development, national defense construction and strategic security as the center, national strategies, and national defense policies have a decisive influence on industry development.

Under the current background of the country’s accelerated national defense modernization construction and the upgrading of aviation weapons and equipment, the scale of delivery of aviation defense equipment products and the development of new equipment will usher in a new peak period.

Benefiting from the upgrade of domestic fighter stocks and expansion, the company’s orders may increase significantly.

1) The J-16 benefits from the upgrade trend of the second generation aircraft. In the future, the replacement space and supplementary requirements for the JH-7 and Su-30MKK will overlap, with a gap of about 300 aircraft.

2) Carrier aircraft is expected to become another major performance growth point.

At the same time, with the accelerated construction of aircraft carriers, the carrier-based aircraft is in urgent task of deployment. As the only carrier-based missile in service, the J-15 may benefit. At the same time, the J-31 is expected to become a new generation of carrier-based aircraft with stealth performance. Foreign trade exports are also worth looking forward.

Reform of the military pricing mechanism is expected to gradually improve profitability.
The company’s fighter aircraft products were reduced to 5% cost-plus pricing mechanism, and the profit margin was reduced. The company’s net profit margin was 3 in 2017/2018.
6% / 3.

7%.

With the reform of the military pricing mechanism, the “cost-plus method” will gradually shift to the “target price method”, and the profitability of machine manufacturers is expected to improve.

According to the international benchmarkable enterprises, if the reform of the military pricing mechanism is implemented, the net profit margin of the machine manufacturers is expected to increase from the current 2-4% to 5% -8% for a long time, which can significantly increase the profit level.

Investment suggestion: As a leader in the manufacture of fighter aircraft, the company will directly benefit from the industry growth driven by the replacement of fighter aircraft and the accelerated release of demand. We expect the company to achieve operating income of 236 in 2019/2020/2021.

99/286.

48/351.

3.1 billion, an annual increase of 17.

6% / 20.

9% / 22.

6%; net profit attributable to mother 9.

18/11.

63/14.

850,000 yuan, an increase of 23 in ten years.

5% / 26.

7% / 27.

7%; EPS0.

66/0.

83/1.

06 yuan; corresponding to PE 45/36/28 times.

With reference to the estimated level of comparable listed companies, taking into account the high growth of the company’s industry and the position of the leader in machine manufacturing, we use the 2020 forecast EPS to give an estimated PE premium of 52 times and a target price of 43.

16 yuan.

Covered for the first time, giving the company a “Buy” rating.

Risk reminders: a) The future domestic fighter demand will mainly increase the replacement of old and used equipment and the increase in the overall number. If the speed of equipment upgrades or the military procurement rate changes, it will affect the company’s fighter order; b) if the development of new carrier-based aircraft is not progressingThe expected time of boarding the ship, or the foreign trade export blocked by the international environment, will also have an adverse impact on the company’s performance growth.