Air China Electronics Releases 2014 Annual Report. The company achieved operating income of 6.606 billion yuan, a year-on-year increase of 10.14; net profit attributable to shareholders of listed companies was 0.601 billion yuan, a year-on-year decrease of 4.28; EPS:0.34 yuan, a year-on-year decrease of 5.56.

Main points of view

1. Operating income grew steadily, benefiting from growth in aerospace and non-aerospace defense sales.

During the reporting period, the company's aviation products and non-aviation defense still maintained a good growth momentum, of which aviation product revenue increased by 17.5 year-on-year; aerospace business revenue increased by 74% year-on-year, ship business revenue increased by 87% year-on-year, and electronic business revenue increased by 46% year-on-year. The weapons business was slightly affected by customer procurement needs.

The comprehensive gross profit margin of the company's main business was 32.55, down 0.55 percentage points year on year. The gross profit margin of the main product aircraft parameter acquisition equipment was 37.6, down 2.5 percentage points year on year.

During 2014, the expense rate was 21.0, up 0.07 percentage points year-on-year, of which the sales expense rate was 1.5, down 0.24 percentage points year-on-year; the management expenses and financial expenses were 11.20 and 0.168 billion yuan respectively, up 8.75 and 38.94 year-on-year, mainly due to the increase in income during the reporting period and the relatively large proportion of accounts receivable. The decline in net profit was mainly due to lower gross margin and loss of management and financial expenses.

2. Aviation equipment installed capacity steadily increased, the main product orders to maintain growth.

The company's main sales customers are aviation equipment mainframe units. The company has established and maintained a good long-term cooperative relationship with customers, and product orders have maintained a relatively stable growth trend.

3. Adhere to the technology homology, derivative development, non-aviation field orders continue to grow.

In the non-aeronautical defense field, based on the existing product technology reserves and accumulation, keep up with the progress of scientific research and production of related products, continue to extend the product value chain, and focus on developing aerospace, ships, weapons, second artillery, public security and other market areas. Orders from the non-aerospace defense market continue to grow and have become an important driving force for the company's economic growth.

In the non-aviation civil field, high-end intelligent spinning equipment and drawing machine self-leveling system products fill the domestic gap and reach the international advanced level. Precision control components became a supporting supplier for Volkswagen and General Electric.

4. Managed avionics system company, the probability of injection greatly increased, the company's strength will be further enhanced.

The company trustees AVIC's avionics system company, with a 13-year operating income of 14.88 billion yuan and a net profit of 1.359 billion yuan. The five research institutes: Flight Control Institute, Optoelectronics Institute, Radio Institute, Computing Institute and Lightning Institute are all in the leading position in China in their respective research fields. Once the injection is completed, the company's strength in the field of avionics will be greatly enhanced. In 2014, a custody fee of 41.94 million yuan will be charged. 5. The profit forecast is expected to be about 0.42 yuan, 0.50 yuan and 0.57 yuan in 2015-17, and the corresponding PE is 74X, 62X and 54X respectively, maintaining the "recommend" rating.