| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 22.20 | -52 |
| Intrinsic value (DCF) | 16.14 | -65 |
| Graham-Dodd Method | 11.59 | -75 |
| Graham Formula | 5.48 | -88 |
AECC Aviation Power Co., Ltd is a leading Chinese aerospace and defense company specializing in the design, development, production, maintenance, and sale of large and medium-sized military and civilian aircraft engines. Headquartered in Xi'an, China, the company plays a critical role in China's aviation industry and national defense sector, providing essential propulsion systems for both military and commercial applications. Founded in 1958 and formerly known as AVIC Aviation Engine Corporation, the company rebranded to AECC Aviation Power in 2017, reflecting its strategic importance in China's aerospace ecosystem. Beyond aircraft engines, the company also offers large-scale ship gas turbine power plant production and repair services, diversifying its defense portfolio. As China continues to develop its indigenous aviation capabilities and reduce reliance on foreign technology, AECC Aviation Power stands at the forefront of this national strategic initiative, positioning itself as a key player in the country's aerospace industrialization drive and military modernization efforts.
AECC Aviation Power presents a strategic investment opportunity tied to China's aerospace and defense modernization, but carries significant financial and operational risks. The company operates with negative operating cash flow of -14.3 billion CNY despite 47.9 billion CNY in revenue, indicating substantial working capital requirements or investment phases. With a modest net income margin of approximately 1.8% and diluted EPS of 0.32 CNY, profitability appears constrained despite its strategic position. The company's 0.827 beta suggests lower volatility than the broader market, typical for defense contractors, while its market capitalization of 92.6 billion CNY reflects its established position. Investors should weigh the company's critical role in China's military-civil fusion strategy against its current financial performance challenges and the capital-intensive nature of aerospace engine development.
AECC Aviation Power occupies a unique competitive position as one of China's primary aircraft engine manufacturers, operating within a protected domestic market while facing technological competition globally. The company's primary competitive advantage stems from its strategic importance to China's national security and aviation independence goals, ensuring consistent government support and procurement. As part of China's military-civil fusion strategy, AECC benefits from technology transfer between military and commercial applications, though it still trails Western manufacturers in engine technology maturity and reliability. The company operates in an oligopolistic domestic market with limited competition, protected by national security considerations and high barriers to entry. However, it faces significant technological disadvantages compared to global leaders in terms of engine efficiency, thrust-to-weight ratios, and maintenance intervals. Its competitive positioning is further strengthened by China's import substitution policies and the country's determination to develop indigenous aviation capabilities, creating a captive market for its products. The transition from military to commercial engine applications represents both a challenge and opportunity for future growth and technological advancement.