Key points of investment:
A leading company in the field of liquid metals. Liquid metal is officially called an amorphous alloy. It also has the comprehensive characteristics of solid state, metal, and glass, so its strength is high (more than twice that of stainless steel and titanium alloys) and has strong plasticity (once formed through injection molding and die-casting), and is one of the materials that will dominate future high-tech competition. The company is an absolute leader in the liquid metal field. It has the world's largest production line for zirconium-based amorphous alloys, masters core technology in alloy composition, molding technology and equipment, etc., and is the only company in the world capable of producing a series of large-scale amorphous products. In 2016, the company increased investment, research and promotion of liquid metal products, and successfully entered the supply chain of customers such as Huawei, Nvidia, and Tesla. In the future, there will also be a vast blue ocean of applications such as new energy vehicles, 3C products, wireless charging, high-end medical equipment, and aerospace.
Dig deeper into the magnesium-aluminum alloy market space and cooperate with Tesla. Precision casting parts made of lightweight alloys such as magnesium and aluminum alloys are the company's traditional business. Currently, the company's magnesium-aluminum alloy products have expanded from internal mobile phone holders to tablet and laptop cases, and have successfully entered the supply chains of well-known companies such as Huawei, Samsung, Lenovo, and Weichuang. The magnesium alloy car door project jointly developed by the company and GM won the 2017 International Magnesium Industry Association (IMA) Excellence Award. In addition, it also mass-produced automobile steering systems for Thyssenkrupp (TKP) and ZF TRW (TRW). According to information disclosed by the company's investor activity, the company has also cooperated with Tesla in the automotive field. The company's liquid metal car door locks have also been successfully applied to Tesla's new energy vehicles, and future cooperation will be more extensive.
Technological advantages were abundant and weak, and the first-quarter results were impressive. The company plans to raise no more than 65 million yuan of capital for light alloy precision die-casting production bases, liquid metal R&D centers, precision structural parts industrialization expansion projects, etc., with the aim of reducing material costs and expanding and optimizing the product line. Currently, the construction project of the company's amorphous alloy R&D center is underway. The high-toughness die-cast aluminum alloy project for automobile impact-resistant components has entered the industrialization stage, and the clinical trial of the biodegradable magnesium intra-bone fixing screw project has been approved by the China Food and Drug Administration. In the first quarter of 2017, the company achieved operating income of 165 million yuan, an increase of 74.58% over the previous year; realized net profit of 9.3591 million yuan, an increase of 125.35% over the previous year. The company has technical supremacy in the three fields of liquid metals, magnesium-aluminum alloy automotive products, and medical magnesium alloys. R&D advantages are gradually being transformed into product advantages, and performance release can be expected in the future.
Profit forecasting and valuation. The company has a complete industrial chain for the production of precision die-castings of lightweight alloys such as magnesium and aluminum alloys. Since entering amorphous alloys in 2010, the company has achieved breakthrough results. It has now formed mass production capacity for amorphous alloys, and amorphous alloys will become the company's new profit growth point. We expect the company's 2017-2019 EPS to be 0.14 yuan, 0.17 yuan, and 0.21 yuan respectively. Considering the company's high liquid metal technology threshold and entry into the Tesla industry chain, new energy vehicles are expected to be released in the future, and the valuation will be increased to a certain extent. According to the industry level, the company was given 100 times PE in 2017, corresponding to the target price of 14.00 yuan, giving an “increase in holdings” rating.
Risk warning: Downstream demand falls short of expectations.