Changjiang Securities released a research report stating that AVIC Aircraft Industry Group (02357) is rated as a "Buy", and the company is expected to achieve a net income attributable to shareholders of 3.068/3.689/4.338 billion RMB from 2024 to 2026, with corresponding EPS of 0.38/0.46/0.54 RMB. The company's main business has formed a complete aviation industry chain, including aviation complete machine, aviation supporting systems and related services, engineering services, and aviation-related investments. Control of four A-share listed companies, AVIC Helicopter, Jiangxi Hongdu Aviation Industry, AVIC Jonhon Optronic Technology, and AVIC Airborne Systems, has formed core competitiveness in various businesses of the aviation industry chain. From 2018 to 2023, the company's overall operations have been stable, and revenue and net income attributable to shareholders have steadily increased. The proportion of revenue from aviation supporting systems and related businesses has tended to increase, the gross margin of the company's complete machine business has improved significantly, and the comprehensive gross margin has remained stable with an upward trend.
The main points of the report are as follows:
There is still a gap between our helicopter and trainer aircraft and international standards, and the column fitted aircraft is expected to be accelerated.
The number of our armed helicopters is far lower than that of the United States, and the spectrum coverage is not complete. There is a lack of armed helicopters of 10 tons and above, and the number and structure of helicopters still have considerable room for optimization. AVIC's subsidiary Avicopter is the only listed platform in the helicopter sector of the aviation industry, and its products present a systematic development. It is expected to benefit from the accelerated column fitted helicopter demand. From a global perspective, the ratio of our trainer aircraft to fighter planes is obviously unbalanced, and there is still a lot of space to make up for it. The Hongdu Aviation Company, a subsidiary of the company, has a complete spectrum of primary, intermediate, and advanced trainer aircraft, and is expected to benefit from the demand for large-scale pilot training. The marginal change in the current industry is to form a unified airspace control system, and the low-altitude economy is expected to achieve industrialization and accelerate development. The company's heavy helicopter has a strong ability to carry load and hover, and plays an important role in low-altitude emergency rescue missions. The company's primary trainer aircraft is expected to benefit from the boom in demand for low-altitude sports flight training, and relying on its advantages in general aviation, the company jointly develops high-speed electric vertical takeoff and landing flying machines, and is expected to fully share the dividends of high-speed development of the low-altitude economy.
The supporting system and service layout for military and civilian markets, and the infrastructure construction is expected to lead the prosperity.
The fill-up of the gap in our aviation equipment is expected to drive sustained high prosperity in the demand for avionics and electromechanical systems. AVIC's subsidiary, AVIC Airborne Systems, has achieved airworthiness certification for some of its on-board systems for the C919, and the results are expected to be transferred to other civil aircraft to consolidate the company's ability to support civil aircraft systems. After the asset integration, the profit-making ability is expected to continue to improve. AVIC's subsidiary, AVIC Jonhon Optronic Technology, has achieved level upgrading in the defense field through longitudinal integration, and has horizontally deployed intelligent interconnection, communication, and multi-point development in the civil field. The expansion of military-civilian integration may lift the growth ceiling of the company, and at the same time, it continues to promote new materials, new technologies, and new processes, and deeply promotes full-value-chain cost management, thus the profit-making ability is expected to be improved. In the next 20 years, the number of new commercial aircraft in China is expected to increase by 9,284. The commercial operation of the C919 is expected to lead to an acceleration of the production of domestically-made large aircraft. The number of general airports nationwide is expected to increase by 12.5% in 2023 compared to the previous year. Under the background of vigorously developing the low-altitude economy, the demand for the construction of general airports may grow rapidly. AVIC's subsidiary, AVIC Planning, is expected to fully benefit from the infrastructure construction in the civil aviation and general aviation fields of China.
Risk Warning: 1. The risk of product research and development or key supporting links not meeting expectations; 2. The risk of equipment procurement plan or downstream demand release not meeting expectations; 3. The risk that the assumptions involved in the profit forecast do not materialize or are below expectations.