Industry Investment Rating - The industry investment rating is "Outperform the Market" and is maintained [1] Core Viewpoints - In 2024, the 71 tracked military industry stocks achieved a total revenue of 566.27 billion, a year-on-year growth of 0.76%, while the net profit attributable to shareholders was 23.90 billion, a decrease of 26.24% [4][20] - The decline in profit is primarily attributed to a decrease in overall gross margin, which was 17.67%, down by 1.80 percentage points year-on-year [4][23] - The shipbuilding sector showed significant performance growth, with a revenue of 190.05 billion, up 11.25%, and a net profit of 6.55 billion, up 115.10% [4][37] Summary by Sections 1. Military Industry Performance in 2024 - The overall performance of the military industry in 2024 showed a slowdown in revenue growth and profit pressure [20] - The total gross profit for the 71 military stocks was 100.08 billion, a decrease of 8.53% year-on-year [21] - The overall four expense rate for the 71 military stocks was 12.24%, a slight decrease of 0.07 percentage points [26] 2. Q1 2025 Performance Analysis - In Q1 2025, the 71 military stocks reported a total revenue of 106.75 billion, a year-on-year decrease of 3.15%, and a net profit of 5.61 billion, down 4.40% [6][19] - The shipbuilding sector led in growth, achieving a revenue of 40.99 billion, up 9.81%, and a net profit of 2.05 billion, up 232.11% [6][38] 3. Contract Liabilities - As of the end of 2024, the total contract liabilities for the 71 military stocks reached 198.56 billion, a year-on-year increase of 5.91% [5][58] - The shipbuilding sector saw a significant increase in contract liabilities, growing by 27.14% to 157.05 billion, while the aviation sector's liabilities decreased by 36.69% [5][60] 4. Investment Recommendations - The report suggests focusing on two main investment themes: the ongoing demand for aerospace and the potential of new technologies, products, and markets [10][11] - Key companies to watch include those in the aerospace supply chain and missile industry, such as AVIC Shenyang Aircraft Corporation and AVIC Heavy Machinery [10][11]

Group 1 - The China Securities High-end Equipment Sub-index 50 has decreased by 2.46% as of May 9, 2025, with mixed performance among constituent stocks, led by Aerospace Nanhai up 1.50% [1] - The High-end Equipment ETF (159638) has seen a cumulative increase of 8.55% over the past two weeks as of May 8, 2025 [1] - The High-end Equipment ETF recorded a turnover of 3.05% and a transaction volume of 36.1554 million yuan, with an average daily transaction volume of 97.8379 million yuan over the past week [3] Group 2 - The latest scale of the High-end Equipment ETF reached 1.237 billion yuan, marking a new high for the year, with the latest share count at 1.547 billion, also a new high for the past year [3] - The net inflow of funds into the High-end Equipment ETF was 30.633 million yuan [3] - The top ten weighted stocks in the China Securities High-end Equipment Sub-index 50 account for 45.74% of the index, including companies like AVIC Optoelectronics and AVIC Shenyang Aircraft [3] Group 3 - Institutions forecast a turning point in military industry orders by 2025, driven by new technologies aimed at enhancing equipment performance or reducing costs, and new markets from military trade and technology conversion [3] - Huatai Securities indicates that China has entered a phase of "self-research equipment as the main" military trade net surplus, with significant growth expected in domestic demand from 2025 to 2027 [3] - Investors can consider the China Securities High-end Equipment Sub-index 50 ETF linked fund (018028) to capitalize on industry rotation opportunities [3]

Investment Rating - The investment rating for the company is "Buy" and is maintained [8]. Core Views - The company reported a revenue of 6.165 billion in Q1 2025, a year-on-year decrease of 1.71% and a quarter-on-quarter decrease of 71.88%. The net profit attributable to the parent company was 0.08 billion, down 95.15% year-on-year and down 94.4% quarter-on-quarter. The net profit excluding non-recurring items was 0.19 billion, a decrease of 81.7% year-on-year and 82.25% quarter-on-quarter [2][6]. - The revenue situation in Q1 aligns with the annual guidance expectations, with a sales structure change causing short-term profit fluctuations. The gross profit margin for Q1 was 9.77%, a decrease of 1.87 percentage points year-on-year, but an increase of 2.06 percentage points quarter-on-quarter [10]. - The company experienced a significant improvement in operating cash flow due to increased sales collections, with a net cash flow from operating activities of 2.063 billion in Q1, showing marked improvement compared to the previous year [10]. - The company’s inventory balance at the end of Q1 was 37.247 billion, an increase of 17.5% compared to the beginning of the period, indicating a wait for further demand recovery [10]. - Profit forecasts for the company indicate expected net profits attributable to the parent company of 0.762 billion, 0.990 billion, and 1.323 billion for 2025, 2026, and 2027 respectively, with year-on-year growth rates of -11%, 30%, and 34% [10]. Summary by Sections Financial Performance - Q1 2025 revenue was 61.65 billion, a decrease of 1.71% year-on-year and 71.88% quarter-on-quarter. Net profit attributable to the parent company was 0.08 billion, down 95.15% year-on-year and 94.4% quarter-on-quarter. The net profit excluding non-recurring items was 0.19 billion, a decrease of 81.7% year-on-year and 82.25% quarter-on-quarter [2][6]. Cash Flow and Financial Health - The company’s operating cash flow improved significantly, with a net cash flow of 20.63 billion in Q1, reflecting better sales collections. The financial expense ratio was 1.88%, up 0.94 percentage points year-on-year and 1.16 percentage points quarter-on-quarter [10]. Inventory and Contracts - The inventory balance at the end of Q1 was 37.247 billion, up 17.5% from the beginning of the period. The contract liabilities increased significantly, indicating a robust order book [10]. Profit Forecasts - Expected net profits for 2025, 2026, and 2027 are projected at 0.762 billion, 0.990 billion, and 1.323 billion respectively, with corresponding year-on-year growth rates of -11%, 30%, and 34% [10].

Core Viewpoint - The aviation engine concept sector has shown a positive performance, with a 2.86% increase, ranking 7th among various concept sectors, indicating strong investor interest and potential growth in this area [1][2]. Market Performance - As of May 8, the aviation engine concept saw 74 stocks rise, with notable gainers including Chenxi Aviation and Huarun Co., both reaching a 20% limit up. Other significant performers included Aileda, Rifa Precision Machinery, and Xiling Power, which rose by 9.76%, 7.75%, and 7.37% respectively [1]. - Conversely, stocks such as Maixinlin, Julun Intelligent, and Jizhi Co. experienced declines of 2.64%, 2.55%, and 1.27% respectively [1]. Capital Flow - The aviation engine concept sector experienced a net outflow of 678 million yuan from major funds, with 38 stocks receiving net inflows. Seven stocks saw net inflows exceeding 30 million yuan, led by Haoneng Co. with a net inflow of 136 million yuan [2][3]. - Other notable net inflows included Hangfa Power, Rifa Precision Machinery, and AVIC Heavy Machinery, with net inflows of 81.44 million yuan, 62.90 million yuan, and 56.73 million yuan respectively [2]. Fund Inflow Ratios - Haoneng Co. led the fund inflow ratio with 48.12%, followed by New Dazhou A and Antai Technology at 11.99% and 10.86% respectively [3].

Core Viewpoint - The article discusses the differences and similarities between two indices related to central enterprise technology: the China Securities National New Central Enterprise Technology Leading Index and the China Securities Chengtong Central Enterprise Technology Innovation Index, highlighting their performance and characteristics in the context of recent market movements. Group 1: Differences Between the Indices - The China Securities National New Central Enterprise Technology Leading Index is customized by Guoxin Investment Co., Ltd., while the China Securities Chengtong Central Enterprise Technology Innovation Index is customized by China Chengtong Group [2]. - The selection methods differ: the National New Index scores based on net profit growth, revenue growth, total market capitalization, and R&D expenditure as a percentage of revenue, whereas the Chengtong Index evaluates based on the number and quality of patents and the implementation of equity incentives [3]. - Industry distribution varies significantly; the National New Index focuses heavily on aerospace and defense, electronics, and semiconductors, with a combined weight of nearly 80%, while the Chengtong Index has a more balanced distribution across telecommunications, aerospace and defense, and electronics, with the top five industries also exceeding 80% [4][6]. Group 2: Key Holdings and Performance - The top ten holdings of the National New Index account for 52.63% of the total, with Hikvision and AVIC Optoelectronics each exceeding 7% [8]. - In contrast, the Chengtong Index's top ten holdings represent 60.34% of the total, with China Telecom, Hikvision, and China Mobile each exceeding 7% [12]. - Historical performance shows that while the one-year returns of both indices are similar, the Chengtong Index outperforms the National New Index over three and five years, with the National New Index exhibiting higher volatility across all time frames [14]. Group 3: Valuation and Commonalities - As of now, the National New Index's TTM price-to-earnings ratio has risen to the historical 100th percentile, indicating a high valuation position [15]. - The Chengtong Index's TTM price-to-earnings ratio is also above the historical 80th percentile, suggesting a similarly high valuation, although its historical data is limited [17]. - Both indices select samples from listed companies under the State-owned Assets Supervision and Administration Commission, aim to reflect the overall performance of central enterprises in technology innovation, and emphasize that R&D expenditure as a percentage of revenue should not be less than 3% [20].

Group 1 - The China Securities Military Industry Index (399967) has shown a strong increase of 4.24% as of May 7, 2025, with notable gains in constituent stocks such as AVIC Chengfei (302132) reaching a 20% limit up, and Zhongyun Drone (688297) rising by 16.37% [1] - The leading military ETF (512680) has also increased by 4.23%, marking its third consecutive rise, with a trading volume of 87.04 million yuan and a turnover rate of 2.31% [1] - The latest scale of the military ETF has reached 3.686 billion yuan, a new high for the year, with the latest share count at 3.544 billion, also a six-month high [1] Group 2 - The top ten weighted stocks in the China Securities Military Industry Index as of April 30, 2025, include China Shipbuilding (600150) and Guoke Technology (002625), accounting for a total of 37.03% of the index [2] - Positive signals have emerged in the military sector since 2024, with expectations of increased contract announcements and related transaction amounts in 2025, indicating a recovery in the military fundamentals [2] - According to GF Securities, the EU's defense industrial strategy is shifting towards self-sufficiency, aiming for 50% of defense equipment procurement to be sourced internally by 2030, which may benefit qualified Chinese companies with production capacity [2]

Core Insights - The article discusses the development and current state of the aviation engine industry in China, highlighting the complete manufacturing system that has been established [1][2]. Industry Overview - The aviation engine industry includes research and design, manufacturing (raw materials, components, complete machine manufacturing), operation, and maintenance [1]. - Key participants in research and design include major universities and research institutes, such as Beihang University and Nanjing University of Aeronautics and Astronautics [2]. - The complete machine manufacturing segment is primarily dominated by China Aviation Engine Group, while raw material processing involves companies like Fushun Special Steel and Baosteel [2][4]. Regional Distribution - The distribution of aviation engine manufacturing companies is mainly concentrated in inland regions of China, with titanium alloy material leaders located in Shaanxi and other material representatives in Jiangsu [4]. Company Performance - Aviation Power (航发动力) leads the industry with projected revenue of 44.994 billion yuan in 2024, with an average gross margin of around 25% across the industry [5][7]. - Other notable companies include: - AVIC Heavy Machinery (中航重机) with revenue of 8.108 billion yuan and a gross margin of 23.69% [7]. - AVIC Control (航发控制) with revenue of 4.882 billion yuan and a gross margin of 28.11% [7]. - AVIC Technology (航发科技) with revenue of 2.572 billion yuan and a gross margin of 16.09% [7]. - Yingliu Co. (应流股份) with revenue of 1.208 billion yuan and a gross margin of 34.24% [7]. Investment Trends - Recent investment trends in the aviation engine industry focus on enhancing the supply chain and improving technological capabilities [9]. - Aviation Power has invested in multiple subsidiaries to strengthen its industry chain, while AVIC Heavy Machinery has acquired stakes in precision casting companies to enhance its technical strength [10].

Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [3] Core Insights - The industry is experiencing a bottoming out phase due to multiple factors, but signs of improvement were observed in Q1 2025, particularly in upstream components and new directions [11][13] - Profitability has slightly fluctuated due to various influences, with ROE constrained by asset efficiency and net profit margin needing improvement [53][56] - Traditional main tracks show clear signs of recovery, while new directions are in the early stages of industrialization but exhibit initial growth potential [90][91] Summary by Sections Industry Overview - The military industry faced a decline in revenue and profit growth in 2024, but Q1 2025 showed a narrowing of profit decline to -24.6% [19][20] - The main track's revenue growth was affected by contract signing and delivery schedules, with a notable profit drop in Q4 2024, followed by a recovery in Q1 2025 [20][21] Main Track Performance - Upstream components are showing early signs of recovery, with revenue growth rates for upstream, midstream, and downstream segments varying significantly [25][29] - Downstream manufacturers experienced short-term performance pressure due to contract signing delays, but some companies like Hongdu Aviation showed strong growth [29][30] Profitability Analysis - The overall profitability of the military sector slightly decreased in 2024, with a marginal improvement in Q1 2025 [56][58] - The main track's profitability was impacted by price adjustments and demand fluctuations, with a slight recovery noted in Q1 2025 [58][61] New Directions - New directions in the industry, such as military trade and new equipment, are showing upward trends in Q1 2025, indicating potential for growth [101][110] - Specific segments like infrared and ammunition within new equipment are experiencing significant revenue growth, reflecting high market demand [104][110] Future Outlook - The report emphasizes the importance of selecting companies with enhanced product capabilities, increased penetration rates, and higher average transaction values as the industry approaches the end of the 14th Five-Year Plan [117][118] - Key investment opportunities are identified in companies like Aerospace Electric and Feiliwa, which are expected to benefit from the upcoming military spending and technological advancements [117][118]

Core Insights - The company achieved a revenue of 47.88 billion yuan in 2024, representing a year-on-year increase of 9.48%, but fell short of the annual budget of 49.76 billion yuan by 96.22% [1][2] - The net profit attributable to shareholders was 860 million yuan, down 39.48% year-on-year, completing 56.88% of the annual budget of 1.51 billion yuan [1][2] - The company anticipates a challenging budget for 2025, projecting a revenue of 47.66 billion yuan, which is nearly flat compared to 2024, and a net profit of 592 million yuan, down 31.16% from 2024 [2][4] Revenue and Profit Analysis - Revenue from the aviation engine and derivative products reached 44.99 billion yuan, up 10.03% year-on-year, but the gross margin decreased by 0.48 percentage points to 9.54% due to increased costs from new product maturity [2][3] - The foreign trade export subcontracting business generated 2.07 billion yuan in revenue, a 6.45% increase, with a gross margin improvement of 5.30 percentage points to 19.72% due to increased orders [2] - Non-aviation products and other businesses saw a revenue decline of 24.91% to 197 million yuan, with a gross margin decrease of 1.32 percentage points to 18.41% due to reduced high-margin product sales [2] Cost and Expense Overview - The overall sales gross margin for 2024 was 10.06%, down 1.03 percentage points year-on-year, attributed to increased costs and new product maturity [3] - Research and development expenses surged by 79.82% to 999.5 million yuan, driven by increased development tasks [3] - Financial expenses rose significantly by 84.30% to 457 million yuan due to an increase in interest expenses from higher interest-bearing liabilities [3] Balance Sheet and Cash Flow - Accounts receivable increased by 70.59% to 35.72 billion yuan, primarily due to delayed collections [4] - Accounts payable rose by 35.86% to 24.43 billion yuan, reflecting increased production tasks and raw material procurement [4] - Cash received from sales decreased by 15.13% to 30.75 billion yuan, indicating reduced cash flow from sales [4] Future Projections - The company forecasts net profits of 662 million yuan, 884 million yuan, and 1.22 billion yuan for 2025, 2026, and 2027, respectively, with corresponding valuations of 132, 99, and 71 times [4]

Financial Performance - The company's operating revenue for Q1 2025 was ¥6,164,858,155.55, a decrease of 1.71% compared to ¥6,272,295,886.18 in the same period last year[4] - The net profit attributable to shareholders was ¥7,511,371.77, representing a significant decline of 95.15% from ¥154,854,528.80 year-on-year[4] - The basic earnings per share dropped by 95.18% to ¥0.0028 from ¥0.0581 year-on-year[4] - Net profit for Q1 2025 was ¥35,129,600.57, a significant decline of 81.1% from ¥185,796,641.69 in Q1 2024[19] - Total profit for Q1 2025 was ¥70,297,487.08, a decrease of 67.8% from ¥218,144,023.47 in Q1 2024[19] - The company's total revenue for Q1 2025 was CNY 2,611,903,470.76, a decrease of 27.2% compared to CNY 3,584,153,486.36 in Q1 2024[30] - The net profit for Q1 2025 was CNY 40,446,336.08, down 25.7% from CNY 54,422,775.93 in Q1 2024[30] Cash Flow and Liquidity - The net cash flow from operating activities increased by 168.54%, reaching ¥2,063,115,227.25, compared to a negative cash flow of ¥3,009,892,150.92 in the previous year[4] - Cash flow from operating activities for Q1 2025 was ¥2,063,115,227.25, a recovery from a negative cash flow of ¥3,009,892,150.92 in Q1 2024[22] - The company reported a significant increase in sales cash inflow to ¥15,122,815,624.49 in Q1 2025, compared to ¥6,764,319,733.42 in Q1 2024[22] - The company incurred a net cash outflow from financing activities of ¥5,883,073,171.56 in Q1 2025, compared to a net outflow of ¥1,421,279,638.80 in Q1 2024[23] - The company's cash and cash equivalents were CNY 747,805,365.41 as of March 31, 2025, down from CNY 1,111,766,562.25 on December 31, 2024[26] - The company reported a significant decrease in cash and cash equivalents from CNY 7.73 billion to CNY 3.22 billion, highlighting liquidity concerns[13] - The total cash and cash equivalents at the end of Q1 2025 were approximately $747.81 million, a decrease from $1.43 billion at the end of Q1 2024[35] Assets and Liabilities - The company's total assets decreased by 2.68% to ¥112,812,044,875.41 from ¥115,913,298,911.68 at the end of the previous year[4] - As of March 31, 2025, the total assets of China Aviation Engine Group Co., Ltd. amounted to CNY 112.81 billion, a decrease from CNY 115.91 billion as of December 31, 2024[12] - The company's current assets decreased to CNY 80.60 billion from CNY 83.90 billion, primarily due to a reduction in cash and cash equivalents[13] - Total liabilities decreased to CNY 65.06 billion from CNY 70.40 billion, reflecting a reduction in short-term borrowings[15] - The total liabilities decreased from CNY 18,163,414,040.39 on December 31, 2024, to CNY 17,169,757,022.83 on March 31, 2025[27] Research and Development - Research and development expenses increased by 76.14%, indicating a rise in investment in R&D activities[6] - Research and development expenses rose to ¥79,488,949.10 in Q1 2025, an increase of 76% compared to ¥45,129,453.71 in Q1 2024[18] - The company's R&D expenses for Q1 2025 were CNY 6,054,157.81, indicating ongoing investment in innovation[30] Financial Expenses - The financial expenses surged by 97.32%, primarily due to an increase in interest expenses from interest-bearing liabilities[6] - The company reported a financial expense of CNY 36,672,577.58 in Q1 2025, significantly higher than CNY 5,158,743.27 in Q1 2024, primarily due to increased interest expenses[30] Inventory and Receivables - Accounts receivable stood at CNY 35.05 billion, slightly down from CNY 35.72 billion, indicating a stable collection period[13] - Inventory increased significantly to CNY 37.25 billion from CNY 31.70 billion, suggesting potential overstocking or increased production[13] - The company's inventory increased to CNY 8,612,573,859.29 as of March 31, 2025, from CNY 8,409,707,894.18 as of December 31, 2024[26] Shareholder Information - The number of ordinary shareholders at the end of the reporting period was 140,870[8] - The company has not reported any significant changes in its shareholder structure or major financing activities during the reporting period[10] Other Observations - There are no new product launches or technological advancements mentioned in the current report, focusing instead on financial metrics[11]