Core Viewpoint - The company is actively engaging in various business segments, including civil aviation, international cooperation, and derivative businesses, with a focus on expanding market share and enhancing brand influence amid the recovery of the aviation industry. Group 1: Civil Aviation Business - The company is a key player in the commercial aircraft supply chain, prioritizing resources to support the development and certification of commercial engines, expecting a positive impact on performance in the latter half of the 14th Five-Year Plan as domestic aircraft power systems are advanced [1] - The company aims to form a second growth curve by integrating into the large aircraft industry chain [1] Group 2: International Cooperation - The international cooperation business, which involves providing precision components for well-known foreign aviation companies, saw a revenue increase of 11.84% year-on-year in the first half of the year [1] - The company plans to seize opportunities from the recovery of international civil aviation to expand its market and enhance cooperation levels [1] Group 3: Derivative Business - In the first half of 2025, the derivative business generated revenue of 92.67 million yuan, with a slight decline due to customer demand shifts [1] - The company is adjusting its product structure and exploring new markets, such as general aviation power control, to positively impact performance [1] Group 4: General Aviation Power Business - The company is actively involved in the development of mid-to-high-end general aviation power products, with promising prospects due to low-altitude economic policies and infrastructure development [1] - The AES100 product has received production certification in collaboration with the main engine manufacturer [1] Group 5: Performance Changes - The decline in revenue and profit in the first half of 2025 is primarily attributed to the impact of tax reform policies [1] Group 6: Military Trade Business - The company is working with relevant parties to expand the foreign aviation power equipment market, with new opportunities arising from the demand for domestically developed high-performance aviation equipment [1] Group 7: Capacity Assurance - The company adheres to a "small core, large collaboration, specialization, and openness" system to strengthen internal capabilities and leverage external supply chains [1] - Current capacity is sufficient to meet production and repair tasks, with expectations for growth in the main business scale over the next 2-3 years [1] Group 8: Group Reform Progress - A new company, Wuxi Motion Control Technology Co., Ltd., has been established, with personnel transitions underway [1] Group 9: Equity Incentives - The company is implementing diverse incentive measures for key talents and exploring positive incentive mechanisms, with plans to disclose progress in accordance with regulations [1]

Core Viewpoint - The company is experiencing a decrease in sales revenue due to external factors affecting product delivery and some products not yet contracted, leading to increased financing needs and financial expenses in the first half of 2025 [2][3] Group 1: Financial Performance - Sales revenue in the first half of 2025 decreased year-on-year due to external factors impacting product delivery and delayed contract signings [2] - Increased financing needs were driven by slower-than-expected receivables collection, resulting in higher financial expenses compared to the previous year [2] Group 2: Product Structure and Profitability - The company is undergoing a product structure upgrade, with a significant increase in the proportion of new product models, which has impacted profitability [3][4] - The adjustment in product structure is seen as a necessary and positive move for long-term growth, despite causing short-term challenges and pressure on overall profit margins [4][5] Group 3: Market Strategy and Opportunities - The company plans to leverage its advantages in technology and product similarity to expand into the domestic commercial engine market [4] - The company is focusing on the low-altitude economy sector through its subsidiaries, enhancing market penetration with specific engine series [4] - The company aims to capitalize on long-term growth opportunities presented by the domestic large aircraft industry chain while continuously improving market share [5]

Investment Rating - The industry investment rating is maintained as "Positive" [4] Core Viewpoints - The appointment of Zhang Yujin as the chairman of AVIC Engine Group indicates a potential return to high growth for the engine sector, with a broad market outlook [3][7] - The core technologies in the aviation engine industry are maturing, and the pressure on profitability from high investment in model development is expected to ease [7] - The maintenance, commercial aviation, and gas turbine sectors are opening up broader development opportunities for the aviation engine segment [7] Summary by Relevant Sections Industry Overview - The aviation engine industry has made significant progress over the past five years, achieving independence from imported engines for military applications and actively participating in the development of domestic commercial engines [7] Market Dynamics - The demand for weaponry and equipment is expected to expand due to ongoing international tensions, which will benefit the military trade market [6] Investment Recommendations - The report suggests focusing on specific segments within the aviation engine industry, including maintenance, commercial aviation, and gas turbines, as they present substantial growth potential [3][7] - Listed companies under AVIC Group include AVIC Power (600893), AVIC Control (000738), AVIC Technology (600391), and AVIC Materials (688563) [7]

Group 1: Business Outlook - The company expects a decline in revenue for 2025 due to peak demand for certain military products and tax policies, but long-term trends remain positive with new models and market expansions [2] - The military aviation power control business is driven by rapid growth in maintenance services and urgent demand for new models [2] - The company is actively pursuing opportunities in general aviation and international trade, aiming to increase market share despite short-term challenges from trade tensions [2][5] Group 2: Financial Performance - In 2024, the repair business revenue is projected to increase to approximately 16%, with a year-on-year growth of about 290 million [3] - International cooperation revenue grew by 5.48%, but gross margin slightly decreased due to rising material costs and increased R&D efforts [5] - Subsidiary West Control Technology reported revenue of 2.383 billion, a year-on-year increase of 2.28%, while Guizhou Honglin achieved revenue of 1.685 billion, remaining stable [6] Group 3: Product Development - The company is focusing on the development of high-end pumps and electro-hydraulic products, which are expected to support future revenue growth [2] - The company is advancing the development of various control systems for commercial engines, with significant progress in the Longjiang series [3] - The company is also exploring maintenance services for domestic aircraft like C919, which is expected to positively impact future performance [3] Group 4: Challenges and Risks - The company faces challenges with accounts receivable due to industry settlement characteristics, with approximately 90% of revenue coming from military products [7] - Operating cash flow turned negative in 2024, influenced by the timing of accounts receivable, but is expected to improve in early 2025 [7] - The company is navigating uncertainties in international cooperation due to potential impacts from U.S. tariff policies [5]