Event: the company disclosed its semi-annual report of 2022, with revenue of 50.443 billion yuan in the first half of 2022, + 34.75% year-on-year, and net profit of 389 million yuan, + 4.42% over the same period last year. In a single quarter, the company Q2 achieved a net profit of 255 million yuan, a month-on-month comparison of + 90%.

The high sales of copper products in the new energy field led to the growth of the company's production and sales, the profit of the superimposed magnetic material business increased, and the company's performance increased year-on-year. 1) the sales volume of new energy vehicles + photovoltaic wind power is growing rapidly. In the first half of 2022, the installed capacity of new energy vehicles, photovoltaic wind power and other fields increased rapidly, and the demand for copper products was strong. The company's sales in the field of new energy vehicles reached 49700 tons, + 460% compared with the same period last year, and photovoltaic wind power reached 29000 tons, + 68% compared with the same period last year. The high growth in sales in the new energy sector led to the growth of overall production and marketing. In the first half of the year, the total production and sales of all kinds of copper products reached 84.53 and 749900 tons respectively, + 12.27% and + 19.56% respectively compared with the same period last year. Considering the climbing capacity of 80,000 tons of hot-rolled copper strip and 50,000 tons of high-strength and high-guide rod line in Ningbo, the company's production and sales are expected to continue to grow month-on-month in the second half of the year, and is expected to achieve high growth for the whole year. 2) the demand is exuberant and the profit of magnetic material business is high. In 2022, the strong demand for new energy vehicles, wind power, and energy-saving motors led to a high consumption of magnetic materials, and the company's magnetic materials business achieved a high growth. The wholly-owned subsidiary Ketian Magnetic Industry achieved a net profit of 103 million yuan, a sharp increase of 104% over the same period last year, contributing considerable profits to the company. The profit of Baotou project is expected to continue to grow at a high speed after it is put into production in the future.

The previous fund-raising projects have been put into production one after another and new convertible bonds are expected to continue to expand the scale of copper products, and magnetic production capacity is expected to increase by 160% in 2024. 1) the convertible bond project will be put into production one after another in 2020, and it is estimated that 2.4 million tons of production capacity will be achieved after the convertible bond project is put into production in 2022. The company's 2020 convertible bond investment projects have been put into production in 2022, and the company has added about 520000 tons of copper products (including 80,000 tons of copper strips + 50,000 tons of high guide bar wire + 350000 tons of copper wire + 20,000 tons of high-end electromagnetic wire + 20,000 tons of precision copper bars). In 2022, the company raised new convertible bonds to invest 190000 tons of copper production capacity (40,000 tons of electromagnetic flat wire for new energy vehicles + 80,000 tons of high efficiency heat dissipation copper tubes + 70,000 tons of precision bars), which is expected to be put into production from 2024 to 2025. at that time, the total production capacity will reach 2.4 million tons. 2) the magnetic material Baotou project is expected to be put into full production in 2024. The company has a magnetic production capacity of 5000 tons, and the first and second phases of the new 13000-ton project in Baotou will be put into production in 2023-24. Capacity expansion is expected to lead to the continued growth of magnetic materials business.

Profit forecast and investment suggestion: it is estimated that the net profit of return to home in 2022-2024 is 1.28 billion yuan.

Taking into account capacity expansion, product structure optimization, for the first time to cover the company's "overweight" rating.

Risk tips: downstream demand is lower than expected, product prices fluctuate, and projects under construction are not as expected.