Investment Rating - Buy rating initiated for AVIC Aircraft (2357 HK) [5] Core Views - AVIC Aircraft is a key listed platform for AVIC's aviation equipment high-tech industry in Hong Kong, with a complete aviation industry chain covering upstream, midstream, and downstream businesses [5] - The company has been undergoing continuous professional integration, forming core competitiveness in the aviation industry [5] - The gap in aviation equipment quantity and structure between China and the US is significant, which is expected to drive sustained high demand for helicopters, trainer aircraft, and supporting systems [2] - The domestic large aircraft C919 is expected to accelerate mass production, and the company is deeply involved in the construction of mass production capabilities [2] - Low-altitude economy policies are being intensively introduced, and the company is leveraging its general aviation advantages to jointly develop vertical takeoff and landing aircraft, while also participating in the construction of general aviation infrastructure [2] Business Overview - AVIC Aircraft has formed a complete aviation industry chain, including aviation aircraft, supporting systems, engineering services, and aviation-related investments [5] - The company holds controlling stakes in four A-share listed companies: AVIC Helicopter, Hongdu Aviation, AVIC Electromechanical Systems, and AVIC Optoelectronics, covering various businesses across the aviation industry chain [5] - The company has been integrating its subsidiaries, such as the merger of AVIC Electronics and AVIC Electromechanical in 2022, and the acquisition of Harbin Aircraft Industry Group and Changhe Aircraft Industry Group by AVIC Helicopter in 2023 [5] - From 2018 to 2023, the company's revenue and net profit attributable to the parent company have grown steadily, with the revenue proportion of supporting systems and related businesses increasing, and the gross profit margin of the aircraft business improving significantly [5] Helicopters and Trainer Aircraft - China's armed helicopter fleet is significantly smaller than that of the US, with a lack of 10-ton and above helicopters, indicating substantial room for optimization in both quantity and structure [6] - AVIC Helicopter, a subsidiary of AVIC Aircraft, is the only listed platform for AVIC's helicopter business, with a product line that is expected to benefit from the accelerated deployment of helicopters [6] - China's trainer aircraft fleet is relatively small compared to its fighter aircraft fleet, with a significant gap to be filled [6] - Hongdu Aviation, another subsidiary, has a complete spectrum of primary, intermediate, and advanced trainer aircraft, which is expected to benefit from the increasing demand for pilot training [6] Supporting Systems and Services - The gap in aviation equipment between China and the US is expected to drive sustained high demand for avionics and electromechanical systems [7] - AVIC Electromechanical Systems, a subsidiary, has achieved airworthiness certification for some systems of the C919, and the results are expected to be applied to other civil aircraft, enhancing the company's capabilities in civil aircraft supporting systems [7] - AVIC Optoelectronics has expanded its presence in both military and civilian markets, with its products being used in smart connected vehicles, communications, and civil aircraft, which is expected to elevate the company's growth ceiling [7] Infrastructure Construction - Over the next 20 years, China is expected to add 9,284 new commercial aircraft, which will drive the demand for infrastructure construction [7] - The number of general aviation airports in China increased by 12 5% year-on-year in 2023, and the demand for general aviation infrastructure construction is expected to grow rapidly under the national policy of developing the low-altitude economy [7] - AVIC Planning & Design Institute, a subsidiary, is expected to benefit from the construction of infrastructure in the civil and general aviation sectors [7] Financial Forecasts - The company is expected to achieve net profit attributable to the parent company of 3 068/3 689/4 338 billion RMB in 2024-2026, with year-on-year growth of 25%/20%/18% [8] - The corresponding EPS is expected to be 0 38/0 46/0 54 RMB, and the PE ratio based on the market value as of June 13, 2024, is 10/8/7 times [8] - Based on the historical valuation center of 14 times since 2019, the company is given a "Buy" rating [8]
中航科工：航空高质量引领平台，科创资本型孵化旗舰