Events:

The company released its semi-annual performance report for 2021, with operating income of 17.253 billion yuan, an increase of 83.66% over the same period last year, and net profit of 258 million yuan, an increase of 322.44% over the same period last year, deducting 175 million yuan of non-net profit, an increase of 457.90% over the same period last year.

Main points of investment:

The business has developed rapidly and the net interest rate has increased steadily. The revenue in the first half of the year was 17.253 billion yuan, an increase of 83.66% over the same period last year, and the net profit was 258 million yuan, an increase of 322.44% over the same period last year. This was mainly due to the continuous growth of the business scale of the two major business sectors, advanced basic materials and new military materials, and an increase in gross profit. The gross profit margin was 6.27%, slightly lower than the same period last year (0.66pct), mainly due to the increase in copper price and the adjustment of transportation, packaging and installation fees to the cost of the main business. During the period, the expense rate was 1.60%, which was 1.59% lower than the same period last year, and the net profit rate was 1.59%, an increase of 0.81pct over the same period. The inventory was 2.291 billion yuan, up 34.37% over the same period last year, and the contract debt was 159 million yuan, an increase of 46.17% over the same period last year, indicating that the downstream demand is strong, the company has sufficient orders on hand, it is actively preparing production and materials, and the production scale continues to expand.

Both production and marketing are prosperous, with two-wheel drive. The production and marketing scale of basic materials and new materials continued to grow, the "Copper Alloy Strip Product upgrading, capacity replacement and Intelligent Transformation Project" reached full production, and the sales of copper-based materials reached 311300 tons, an increase of 31.29% over the same period last year. Steel-based materials achieved sales of 82300 tons, an increase of 11.44% over the same period last year. The high-end equipment, carbon fiber composite R & D and manufacturing business had sufficient orders-on-hand, with a business income of 375 million yuan, an increase of 42.64% over the same period last year.

Embrace the high prosperity of the military industry, the future performance can be expected. The company mainly has two businesses: basic new materials and military new materials. It is the leader of advanced copper-based materials in China, with a market share of 10.49%, ranking first in China. Future fund-raising projects will continue to increase production capacity. Relying on the two subsidiaries of Skybird High-tech and Dingli Technology, the company actively carries out the military business with high gross profit margin, which is mainly used in the aerospace field. At present, new projects have been put into production one after another, and the products have been gradually released. With the mass production of military aircraft and the forensics operation of C919 aircraft, the company's performance can be expected.

Profit forecast and investment rating: maintain buy rating. It is estimated that the return net profit of the company from 2021 to 2023 is 624 million yuan, 782 million yuan and 962 million yuan respectively, and the corresponding EPS is 0.47 yuan, 0.59 yuan and 0.72 yuan respectively, and the corresponding share price PE is 23 times, 18 times and 15 times respectively.

Risk tips: 1) the product delivery schedule is not as expected; 2) the order fluctuation risk; 3) the production expansion progress is not as expected; 4) the company's profit is not as expected.