AVIC Electronics (600372): Expansion of the subsidiary’s avionics leading usher in a new chapter in development

AVIC Electronics (600372): Expansion of the subsidiary’s avionics leading usher in a new chapter in development

Guide to this report: AVIC Electronics transferred its subsidiary Baocheng Instrumentation to an airborne company.

Baocheng 杭州夜网论坛 Instrument has continued to grow in recent years, dragging down the performance of listed companies. After replacement, AVIC Electronics will enhance its profitability and promote the company’s sustainable development.

Investment Highlights: Maintain target price of 17.

9 yuan, increase holdings.

On December 5, the company announced that it would transfer 100% equity of its subsidiary Baocheng Instrument to the airborne company through an agreement transfer. Baocheng Instrument continued to transform. After the replacement, the profitability of listed companies will be enhanced.

We maintain our 2019 EPS forecast of 0.

31 yuan, raised by 2020?
2021 forecast to 0.

42/0.

49 (was 0.

37/0.

42) yuan, maintaining target price of 17.

9 yuan and “overweight” grade.

Enhance profitability and promote sustainable development of the company.

1) The subsidiary Baocheng Instrument has continued to lose money in recent years, as of 2018 1.

2.1 billion.

According to preliminary calculations, if Baocheng Instrument is deducted, AVIC will achieve a net profit of about 600 million in 2018 (actually 4).

800 million), the removal of Baocheng Instrument will help thicken the company’s performance.

2) The company has 11 subsidiaries. Except Baocheng Instruments, the other subsidiaries have made better profits. Baocheng Instruments is the main reason for the rapid growth of the company’s performance in recent years.

3) After the replacement of Baocheng Instruments, AVIC’s profitability will be enhanced, and the company’s sustainable development capabilities will be enhanced. We believe that 2020?
The compound growth rate of the company’s performance in 2021 is expected to exceed 20%.

The avionics market has a bright future and is optimistic about the company’s long-term development.

1) The company is a leader in military avionics for developing countries. Previously, the market size of military avionics was expected to reach about 500 billion in the next 20 years, and the company is expected to fully benefit.

2) In the next 20 years, the domestic civil aviation avionics equipment market space is expected to reach 100 billion U.S. dollars, and the company is expected to participate in the domestic replacement of domestic large aircraft avionics systems with broad prospects.

As the sole provider of many important systems for domestic aviation platforms, the company actively participates in key equipment and major national science and technology special development tasks, and is optimistic about the company’s long-term development.

Catalysts: batch production of military aircraft; asset injection.

Risk Warning: The batch production of new military aircraft is less than expected.