26/03/2020

Zhongzhi shares (600038): new 10-ton general-purpose helicopters or increase delivery is expected to increase performance in 19 years

I. The main logic of Zhongzhi’s investment: 10-ton general-purpose helicopters may have been delivered in small batches, and it is expected to increase the delivery in 2019; the huge demand space for army helicopters for the expansion of the biomedical helicopters is expected in the next three yearsThe demand gap is at least 500, and the high prosperity of the helicopter industry is expected to continue.

The new 10-ton general-purpose helicopter is expected to increase the number of deliveries in 2019, which will be an important performance growth point.

The 10-ton general-purpose helicopter is expected to have a powerful expansion capability compared to the “Black Hawk”, and the GM of the three armed forces has a large space for installation.

The benchmark American Black Hawk accounted for 53% of its military helicopter helicopters. We believe that it is even conservatively expected that more than 600 10-ton general-purpose helicopters will reach more than 600 in the next decade.

According to the 2018 annual report, the revenue and profit of the Zhongzhi Harbin branch (product series include: Straight 9, Straight 19, Y12, EC120, H425, etc.) decreased respectively by 30: 30.

58%, 66.

63%. On the basis of stable delivery of other budgets, the maximum profit growth rate exceeds the revenue growth rate or indicates that the new helicopter products have been delivered in small batches and the gross profit level is relatively high.

We believe that 10-ton general-purpose helicopters are expected to increase the number of deliveries in 2019 on the basis of small-volume delivery in 2018, which will become an important growth point for the company’s future performance.

Multiple financial data verify that the delivery of military helicopters will increase in 2019, and the 19-year performance growth will promote speed.

First of all, the company estimates that the amount of related party transactions with the Aviation Industry Group in 2019 for selling goods and providing services is 190.

75 ppm, with an expected increase in ceiling of 25 per year in 2018.

69%, we believe that the growth of such related transactions is due to the improvement in the delivery of military helicopters in 2019; secondly, the 2018 Jingdezhen branch (product series include: straight 8, straight 10, straight 11, AC series, etc.) Revenue and profit maximization increase each year: 0.

60%, 7.

43%, we think the first is the stable delivery of the straight 10 model, the straight 8 improved model has not yet been delivered in large quantities.

The straight 8 improved type is also expected to increase the delivery volume and bring performance increase in 2019. Finally, the first quarter of 2019, the contract debt ceiling in the previous period increased the advance receipts (16.

7.2 billion, +44.

28%), indicating an increase in order volume; prepayments for the first quarter of 2019 increased by 38 per year.

92%, mainly due to the increase in production and procurement.

We believe that military helicopter deliveries are expected to increase this year, and performance growth is expected to accelerate.

The Army Air Force expansion has given rise to huge demand for conventional military helicopters. It is expected that the demand gap will be at least 500 in the next three years.

Army aviation is an important branch of our army in building “three-dimensional defense”.

Our army’s Army Aviation unit was 重庆耍耍网 accurately expanded in the military reform launched at the end of 2015. At present, our Army’s 13 Army Aviation Brigade + 2 Air Sudden Brigade have been completely reformed (this round of army reform has formed 3 Army Aviation Brigade).

According to reports, according to data from CCTV News and the Jamestown Foundation in the United States, in the future, some Army will deploy and develop 15 Army brigades (13 group army + Tibet / Xinjiang 2 military districts) and 5 air burst brigades (5 major theaters), eachThe Army Aviation Brigade and Air Sudden Brigade require 100 and 72 helicopters respectively. In the future, the ground army will need a total of about 1,860 military helicopters.

In the next three years, only three newly formed Army Aviation brigades will be considered to be equipped with 70 helicopters per brigade (consideration during the formation process is not up to full capacity), and the existing 13 Army Aviation brigades and two Air Force brigades will each have 70 helicopters.The calculation of 20 helicopters for each brigade has been updated. Previously, the demand gap for army helicopters was at least 500.

In addition, 075 helicopter carriers, 055 and 052D destroyers will drive demand for naval helicopters.

  As the only listing platform of the China Aviation Industry Corporation’s helicopter sector, Zhongzhi will fully benefit from the development of military helicopters.

  Second, investment proposal: In the context of the expansion of the Army Air Force and the deployment of 075 helicopter carriers and other ships, there is huge demand for domestic military helicopters; and a new generation of 10-ton general-purpose helicopters will be put into production or the delivery volume will be increased in 2019.We believe that the operating fundamentals of Zhongzhi shares continue to improve, and the company’s operating performance growth in 2019 may have improved.

We expect net profit for 2019-2021 to be 6, respectively.

47, 7.

96, 9.

4.1 billion, the previous growth rate was 26.

8%, 23.

1%, 18.

2%, EPS is 1.

10, 1.

35, 1.

60 yuan, corresponding to the current expected PE is 39X, 32X, 27X, maintaining the “Buy-A” level.

  3. Risk warning: The reduction of key components affects the delivery schedule and procurement scale; the construction speed of Army Aviation is not up to expectations.