中航高科20250326

Summary of the Conference Call for AVIC High-Tech (中航高科) Industry Overview - The military industry has experienced investment lows and highs over the past five years, with rapid growth from 2020 to 2022, followed by a relative downturn in 2023 and 2024. A structural recovery is expected in 2025, particularly in the missile supply chain and guided equipment sectors, driven by concentrated procurement and downstream inventory stocking, leading to increased orders for upstream electronic component companies. This recovery is reflected in stock prices, indicating sustained growth in the military industry over the next three to ten years [3][4]. Company Position and Strategy - AVIC High-Tech is one of the few companies in the military industry capable of responding to the trend of equipment cost reduction while improving profit margins. The company focuses on aviation auxiliary materials, particularly carbon fiber prepreg, and is expanding into new business areas such as commercial aircraft engines and low-altitude vehicles [4][5]. - The company has undertaken significant measures, including asset restructuring, divesting non-core businesses, implementing equity incentives, and establishing new companies to concentrate on its core business of aviation auxiliary materials and actively explore emerging fields [4][6]. Financial Performance - Despite price pressures in the carbon fiber industry, AVIC High-Tech has achieved a gross margin increase from 30% to 38.8% and a net margin increase from 14.8% to 23.1%. This improvement is attributed to the performance of its wholly-owned subsidiary, AVIC Composite Materials, and effective cost control measures that transmit price pressures upstream in the supply chain. The company's return on equity (ROE) has shown a consistent upward trend [6][7]. - The company's market capitalization exceeds 30 billion, with a free float market value of approximately 20 billion, accounting for over 60%, indicating broad market appeal [6]. Future Growth Potential - During the 14th Five-Year Plan period, AVIC High-Tech is expected to see significant growth potential. The robust production plan for domestic large aircraft supports a promising outlook for its commercial aircraft engine supply business. The company is also expanding into new business areas such as low-altitude vehicles and composite materials, preparing adequately for future growth [7][8]. - The demand for aviation new materials is vast, with the penetration rate of auxiliary materials in military and civilian aircraft continuously increasing. The auxiliary materials business is projected to reach 10 billion RMB during the 14th Five-Year Plan period, with substantial growth potential [4][8]. Order and Transaction Insights - The annual report discloses that the actual amount of related transactions for 2024 is 3.22 billion, with an expected increase to 4.25 billion in 2025, representing a 32% year-on-year growth. The main customers are concentrated in AVIC Industry, indicating a good proportion of internal growth [10]. - The company has shown excellent performance in new orders over the past two years, achieving steady growth even when the overall industry has not improved. The aviation new materials business is expected to grow by 16.2% year-on-year in 2025, which is a considerable growth rate compared to other downstream manufacturers [10]. Research and Development Progress - In 2024, AVIC High-Tech achieved several breakthroughs in research and development, including the successful delivery of the AG600 task, progress in composite materials for the C919, and completion of certain military aircraft development tasks. The company has also been selected as a national "specialized, refined, and innovative" small giant and actively participates in domestic and international exhibitions to expand new markets [11]. Profit Forecast - Based on the company's operational guidance, the forecasted net profit attributable to shareholders for 2025 is approximately 1.3 billion RMB, with projections of 1.53 billion and 1.78 billion for 2026 and 2027, respectively. The current market capitalization is around 34 billion, corresponding to a PE ratio of approximately 25-26 for 2025, 21-22 for 2026, and 18-19 for 2027. The valuation indicates that AVIC High-Tech is an attractive investment with significant growth potential expected to manifest over the next three to fifteen years [12].