There is no best material, only the most suitable material! Liquid metal is an amorphous alloy. It is a zirconium alloy solution of more than 1000 degrees. The material process that cools to 200 degrees in a vacuum environment has the advantages of high strength, high precision, high elasticity, and no shielding; the disadvantage is that there are not many mass production suppliers, and processing is difficult. The liquid metal robot in Schwarzenegger's movie The Terminator is the prototype for this product. At this point, we are optimistic about the growth of liquid metals at the current point in time and in the future.
Time and time (changes in the liquid metal industry): 5G has brought about changes in the structure of mobile phones, and the middle frame+non-metallic back case may become mainstream. We think domestic manufacturers are very willing to follow suit. At the same time, they will also occupy a place in small metal parts of mobile phones. As a new material, liquid metal has a strong driving effect on products. 1) Middle frame: Compared with CNC, powder metallurgy, MIM and other processing methods, liquid metal has advanced rapidly. Due to the relatively short process of the net molding+CNC/laser process, the cost of ownership and performance has been reduced by more than 30% compared to the stainless steel middle frame (we estimate its price is around 280 yuan)! It is estimated that the liquid metal middle frame will be used early next year and promoted as black technology. Similar to the ceramic back cover, it will enhance the brand image. 2) Small parts: The glass back cover cannot be drilled like aluminum alloy and cannot be used as a support bracket for cameras and fingerprints, so a metal holder is required. Liquid metal has an advantage in the cost of these small parts. Huawei and Xiaomi have already adopted them in small batches, large customers have already sent samples, and module manufacturers are following suit.
Geographical advantage (changes in liquid metal in China): China is leading the world in liquid metal technology, and industrialization is at the right time. Process, cost, and patents are difficult issues in material promotion. The patent layout is very important. For example, the amorphous strip used by Apple for wireless charging is not allowed to be exported because domestic manufacturers do not have global patents. As early as 2011, Apple purchased a patent for Liquidmetal's global use in consumer electronics for 20 million dollars. Liquid metal has been used in mobile phones for small items such as SIM card holders. Other applications include golf balls, tennis rackets, and armor-piercing bullet tubes. In China, Foxconn, BYD, Yian, and Metals Research Institute have been researching and advancing.
Renhe (changes in Yian Technology): 1) Yian Technology has been developing magnesium alloys and liquid metals for a long time, and has made small metal parts and back covers. Since there are no good customers and equipment technology, there is no cost advantage compared to aluminum alloys in the past. 2) After Professor Li, the company's actual controller, took control of the Hong Kong Liquid Metal Company and participated in Liquidmetal in 2016, he comprehensively laid out patents, channels and popularity to lay the foundation for industrialization. Process capacity has been greatly improved, and equipment can be produced and sold by oneself, becoming an industry leader. At the same time, they have made every effort to build the best team in the industry, with members from top universities in China and the Chinese Academy of Sciences. 3) The company's non-public fund-raising project was approved to expand liquid metal production. We are optimistic that the company will become a leader in this new materials field in the future.
Currently, the company's main business, aluminum-magnesium alloys, has broad application prospects in fields such as automobile lightweighting and medical degradable materials, and is optimistic about its steady growth.
There is no time to delay coping with global warming trends, and lightweight automobiles have become the focus of all countries. We are optimistic that the use of magnesium-aluminum alloys in automobiles will continue to increase. In-depth cooperation with Yunhai Metal is expected to reduce procurement costs in the future. Medical degradable materials are widely used in the bone implant market, and there is plenty of room for market growth.
Investment Ratings and Valuations
The company's R&D and financial expenses were high in '17. After the company's fixed increase of 650 million yuan is completed, it is expected that financial expenses will be drastically reduced in '18. In terms of additional profit, domestic liquid metal customers are conservatively estimated to have contributed 340 million; the magnesium alloy vehicle lightweight project, through the cooperation of magnesium-aluminum alloy supplier Yunhai Metal, saved 1,000 yuan/ton in factory raw material transportation and waste recycling, saving 5% of costs, and contributing 670 million profits. Not counting that major customers already had profits of around 200 million yuan, the estimated net profit for 17-19 was 0.4, 2.0, and 280 million yuan. Excluding share capital increase: corresponding EPS is 0.09, 0.49, 0.69 yuan, corresponding PE is 106, 20, 14 times; considering share capital increase: corresponding EPS is 0.09, 0.44, 0.61 yuan, and corresponding PE is 106, 21, 15 times. The safety margin is relatively high. The first coverage gave it a “highly recommended” rating!
Risk warning
The risk of a drastic change in the structure of a smartphone; the risk that the penetration rate of liquid metal materials does not meet expectations.
