Hangfa Power (600893): Delay in delivery of new technology manufacturing leads to performance change in the first three quarters, which is still optimistic about the long-term development of engine leaders

Hangfa Power (600893): Delay in delivery of new technology manufacturing leads to performance change in the first three quarters, which is still optimistic about the long-term development of engine leaders
Event: The company announced the third quarter report of 2019, and achieved operating income of 127 in the first three quarters.94 ‰, a decrease of 7 per year.61%, net profit attributable to mothers4.1.3 billion, a year-on-year decrease of 36.47%, the corresponding return is 0.18 yuan.Comments: (1) The company achieved operating income of 127 in the first three quarters.94 ‰, a decrease of 7 per year.61%, including 39 in the third quarter.70 ppm, a reduction of 28 per year.28%, mainly due to the use of new technologies in manufacturing standards leading to additional delivery of main products.(2) The company achieved net profit attributable to its mother in the first three quarters.1.3 billion, a year-on-year decrease of 36.74%, of which the net profit attributable to the mother in the third quarter was 0.90 ‰, a decrease of 68 per year.89%, the company’s preliminary poor performance 武汉夜生活网 in the first three quarters includes: a) the main product delivery has gradually led to a decline in operating income in the first three quarters; b) sales expenses have increased significantly38.10%, mainly due to the increase in sales service fees; management costs increase by 8 per year.58%, mainly due to the increase in reform costs and repair costs of subsidiaries in the first half; financial costs increased slightly on several occasions.72%, mainly due to the decrease in interest rate income; c) Investment income has decreased significantly by 55.20%, mainly due to Liyang Power’s disposal of Liyang Tianxiang’s investment income of 88.59 million yuan in the previous year, which was not caused by this matter; d) Non-operating expenses of 40.91 million yuan, a significant increase of 129 over the same period last year.19%, mainly due to the increase in disposal of used equipment in the current period.(3) The gross profit margin in the first three quarters increased by 0 compared with the same period of the previous year.42 points to 18.59%, mainly due to the increase in gross profit margins of the two major business sectors of aero-engines and derivative products, and foreign trade exports, and the company’s implementation of cost engineering to reduce production costs.02pct to 17.79%, basically unchanged.(4) R & D expenses in the first three quarters decreased rapidly by 23 each year.55%, mainly due to the development of self-funded research and development projects transferred to special payables.(5) Asset impairment losses in the first three quarters were -10.64 million yuan, a decrease of 57.32 million yuan from -67.96 million yuan in the same period of the previous year, mainly due to the decrease in provision for bad debts.(6) From the perspective of assets and liabilities: a) Monetary funds at the end of the reporting period were significantly reduced from the beginning of the year by 55.06%, mainly due to the payment of capital reduction of the casting company and the lag in sales repayment; b) accounts receivable increased significantly by 45 compared with the beginning of the year.12%, mainly due to related parties and defense receivables increased by 33.49 trillion; c) inventory increased by 50 from the earlier period.56%, mainly due to the increase in product input, the use of new technology has temporarily failed to achieve sales revenue.(7) From the perspective of cash flow: Report the net cash flow from combined operating activities of -48.49 trillion, -31 from the same period last year.18 trillion reduced by 55.54%, mainly due to the increase in payment to suppliers.The product covers a full range of military aero engines, helping to benefit from the accelerated mass production of military aircraft.The company is the top domestic aero engine manufacturing company, the only company in the country that can produce all types of military aero engines such as turbojets, turbofans, turboshafts, turboprops, and pistons, and is the only domestic supplier of three generations of main combat aircraft.According to the data of “WorldAir Forces 2019”, the number of military aircraft in the United States, Russia, and China is 13,398 / 4,078 / 3,187 respectively, so the overall number of military aircraft is low, of which the main battle volume of the three generations is reduced as the main force and the acceleration of penetration is reduced.Column space.In addition, the company’s aero engine and derivatives business covers five major alternatives of development, production, testing, sales, and maintenance support. The company is expected to fully benefit from accelerated delivery of military aircraft and new model development packages.The demand for civil aircraft is strong, and the market for civil aviation engines is promising.On September 18, 2019, COMAC released the annual forecast report of the civil aircraft market for 2019-2038. The data shows that China’s civil aviation transportation industry completed an increase in passenger turnover in 2018.6%, indicating the previous strong demand in the air transport market.The report predicts that the Chinese aviation market will receive 9,250 passenger aircraft with more than 50 seats in the next 20 years.In the international scope, the company belongs to one of the few companies capable of independently developing aero engine products. It has advanced aero engine development technology, capabilities, experience, data accumulation, and a complete product lineage. There is a certainty that the demand for civil aviation development is growing rapidly.Benefit.Capital increase and debt-to-equity swaps will improve the asset structure and benefit long-term business development.On July 9, 2019, the company announced an announcement regarding the preparation of debt-to-equity swaps and the issuance of shares for asset disposal.The company proposes that six institutional investors such as the National Military-civilian Integration Fund, Guofa Fund, Bank of Communications Investment and other three wholly-owned subsidiaries will increase capital by a total of 6.5 billion yuan. After the capital increase is completed, the company will issue shares to these six institutional investors to acquire threeThe entire equity of the subsidiary.The market-oriented debt-to-equity swap is intended to improve the assets and liabilities of the target company, reduce interest expenses, and benefit the company’s long-term development. Investment suggestion: We predict that the company’s EPS in 2019/20/21 will be 0.52/0.57/0.63 yuan, corresponding to 41/37/33 times the PE, covering for the first time, giving the company an “overweight” rating.Risk warning: the order of aero engine is lower than expected, the development of new models is lower than expected, and the reorganization is uncertain.