The company's traditional main business maintains sound operation, and the excellent performance of the export business highlights the competitive advantage of the company's global layout. The copper foil business is off to a smooth start and is expected to contribute new profit growth points to the company in 2023. Maintain the company's 2022-2024 EPS forecast of 0.75 soybean 1.09 yuan / share, combined with the industry average valuation, based on 2022 20 times PE valuation, maintain the company's target price of 15 yuan, maintain the "buy" rating.

The company's profits maintained a steady growth momentum in the first half of 2022. In the first half of 2022, the company achieved revenue of 38.105 billion yuan, an increase of 14.90% over the same period last year, and a net profit of 651 million yuan, an increase of 4.72% over the same period last year. The net profit of non-return was 563 million yuan, an increase of 18.87% over the same period last year. Of this total, the net profit of Q2 in a single quarter was 339 million yuan, down 3.29% from the same period last year and an increase of 8.65% from the previous quarter. In the first half of the year, the net cash flow of the company's operating activities was 248 million yuan, an improvement compared with the end of 2021, while the asset-liability ratio rose to 65.06%.

The company's main copper processing industry successfully resisted the impact of the epidemic and continued to achieve steady growth. In the first half of 2022, the company sold 460400 tons of copper and copper alloy products, which was basically the same as the same period last year. In the first half of the year, the domestic epidemic in many places had an impact on the company's production, product transportation and downstream consumption, but with a sound business policy, the company's gross profit margin of copper processing products in the first half of the year was 5.61%, an increase of 0.71 pct over the same period last year. Among them, the gross profit margin of copper pipe products was 5.55%, an increase of 0.61pct over the same period last year.

The export business has performed well, and the new scene and new market share have continued to increase. In the first half of the year, the company's export business continued to grow, with overseas income accounting for 30.43%, an increase in 2.7pcts over the same period last year. The average gross profit margin of overseas operations is 9.18 per cent, much higher than the 2.86 per cent level of the domestic market. The company's perfect global capacity layout makes the company more competitive in the abnormal environment of the global supply chain. At the same time, the company's products have grown significantly in new application fields. During the reporting period, sales in areas such as photovoltaic inverters and semiconductor targets increased by more than 30% year-on-year. The company's products are also further promoted in industrial robots, new energy vehicle radiators and other fields.

The construction speed of copper foil production line is the fastest in the business, and the new profit growth point is ready to start. According to the company announcement, on June 14, 2022, the company's first copper foil production line was trial-produced, which was only half a year from the start of the project, creating the fastest level in the same industry. At present, the company has the mass production capacity of 4.6 μ m, 6 μ m and 8 μ m lithium copper foil, and has successively sent samples to downstream customers and obtained orders. In addition to the rapid progress of production line construction, the company has set up a new energy materials research institute and launched projects such as 3.5 μ m extremely thin copper foil and composite current collector. With the completion and commissioning of the 25000-ton production line, the copper foil business is expected to become the company's most important profit growth point in 2023.

Risk factors: local epidemic repeatedly affected the company's production, goods transportation and downstream consumption; increased competition in the copper foil industry led to a decline in product profitability; the company's copper foil product sales growth was not as expected.

Earnings forecast, valuation and rating: with the excellent performance of the export business and sound business strategy, the company maintained steady growth in the first half of the year. The copper foil business is progressing smoothly and is expected to become the most important profit growth point for the company in 2023. Maintain the company's 2022-2024 EPS forecast value of 0.75 pound 1.09 won 1.52 yuan per share. The current comparable companies (Bowei Alloy, Chujiang New Materials and Nord shares) have an average PE valuation of 20 times in 2022 (based on Wind consensus expectations), giving the company a 20 times PE valuation in 2022, maintaining the target price of 15 yuan and maintaining the "buy" rating.