[matters]

The company released its mid-2022 report: in the first half of 2022, the company achieved revenue of 7.224 billion yuan, an increase of 30.23% over the same period last year, and a net profit of 351 million yuan, an increase of 50.47% over the same period last year. Of this total, 2022Q2 achieved a revenue of 3.733 billion yuan, an increase of 33.73% over the same period last year, and a net profit of 174 million yuan, an increase of 169.05% over the same period last year.

[comments]

Auto parts lightweight business continues to rise, leading to steady revenue growth. The company achieved operating income of 7.224 billion yuan in the first half of the year, + 30.23% year-on-year, with excellent revenue performance, mainly due to the rapid growth of the auto parts plate. From a product point of view, the auto parts lightweight business achieved business income of 6.363 billion yuan, an increase of 33.79% over the same period last year; it was mainly due to the growth of magnesium alloy and automotive aluminum alloy wheel business. First, customer orders were sufficient compared with the same period and increased significantly; second, the prices of major raw materials rose sharply compared with the same period last year, and the optimization of price linkage settlement mechanism made sales grow faster than the same period last year.

The operating income of Tonghang aircraft manufacturing business reached 861 million yuan, an increase of 8.85% over the same period last year. From a regional point of view, due to the impact of the epidemic in Shanghai in the second quarter, while the overseas economy is in a state of sustained recovery, the proportion has increased. In the first half of the year, overseas revenue reached 4.122 billion yuan, an increase of 36.64 percent over the same period last year, accounting for 57.06 percent of the total revenue, an increase of 2.68 pct over the same period last year, while domestic revenue reached 3.102 billion yuan, an increase of 22.60 percent over the same period last year, accounting for 42.94 percent of the total revenue, reducing 2.68pct compared with the same period last year.

The profit side has a bright performance, and the profit contribution of magnesium alloy business has increased significantly. In the first half of the year, the company achieved a net profit of 351 million yuan, + 50.47% compared with the same period last year, close to the upper limit of the first half performance forecast. The bright performance of the company's profit side is mainly due to the substantial increase in profits in the magnesium alloy business and the steady release of profits in the aviation aircraft manufacturing business. The main body of the company's magnesium alloy business is Wanfeng magnesium Reading, with operating income of 2.112 billion yuan in the first half of the year, an increase of 54.97% over the same period last year, and a net profit of 199 million yuan, an increase of 76.08% over the same period last year, contributing more than half of the profits in the first half of the year. The company's magnesium alloy business revenue and profit end double high growth, magnesium alloy growth logic is gradually verified.

We believe that with the increase of domestic middle and high-end new energy brands supporting magnesium alloy die castings, magnesium alloy business is expected to continue to grow rapidly; at the same time, with the trend of steady decline in magnesium alloy prices in the second half of the year, the profit end of magnesium alloy business will still have a very good performance this year. The main body of the company's navigation aircraft manufacturing industry is Wanfeng aircraft industry, with a net profit of 139 million yuan, an increase of 15.42 percent over the same period last year. The company's navigation aircraft manufacturing business profits have grown steadily, and this year it is expected to continue to achieve the performance bet target of 367 million yuan in 2022.

[investment advice]

The company's "twin-engine" drive strategy: to become the "global automotive metal lightweight promoter" and "the global leader in GM aircraft innovation manufacturing enterprises", continue to lead the company's growth. We believe that under the general trend of lightweight cars, the company is expected to continue to benefit, and magnesium and aluminum alloy prices have fallen steadily this year, which will have a good positive feedback on the company's profits. It is estimated that the operating income of the company from 2022 to 2024 is 15.335, 181.23, respectively, and the net profit is 7.45, 942, 1.61 billion yuan, respectively. The corresponding EPS is 0.34, 0.43, 0.53 yuan per share, and the corresponding PE is 18.57, 14.70 and 11.92 times, respectively. Maintain the target price of 10.22 yuan and maintain the "buy" rating.

[risk Tip]

Downstream customer demand is lower than expected

The expansion of new energy vehicle business is not as expected.

Risk of price fluctuation of raw materials.