In 2019, the mid-term report was released, and the performance continued to maintain steady growth. The company achieved revenue of 524 million yuan, an increase of 30.06% over the same period last year; net profit of 28.34 million yuan, an increase of 18.55%; basic earnings per share of 0.0616 yuan, an increase of 14.29% over the same period last year; deduction of non-net profit of 19.18 million yuan, a decrease of-7.64% over the same period last year; net operating cash flow of 14.17 million yuan, becoming a regular employee. The company's overall performance has maintained steady growth, mainly benefiting from the development of automotive, consumer electronics, communications and other fields.

The company is the global industrialization leader in the field of liquid metal, with the world's largest production line of zirconium-based amorphous alloys. According to the announcement, the company is a pioneer in the research and development of liquid metal in the industry, with integrated manufacturing capabilities from materials to equipment and design, and is the only company in the world that uses liquid metal in the automotive industry. The company's sales revenue of liquid metal products in the first half of the year was 41.4485 million yuan, an increase of 94.15% over the same period last year. The company achieved a technological breakthrough in 2017, bulk amorphous began mass production in 2018, and the order volume is expected to continue to grow in the future. First, the company's liquid metal products have cooperated with relevant customers in the fields of new energy vehicles, 5G communications, consumer electronics and so on. The liquid metal Face ID bracket produced has been supplied in bulk to domestic well-known mobile phone manufacturers such as XIAOMI, OPPO, Huawei, etc.; the company's 5G base station products include filters, heat dissipation shells, etc., and has further cooperation with Chinese communications and other customers, and has established cooperative relations with Tesla, Inc., Samsung, Lance Technology, ABB and other customers. The second is to sign cooperation agreements with a number of companies and governments to expand the industrialization scale of liquid alloys. According to the announcement, on July 22, the company signed a project investment framework agreement with the people's Government of Qingxi Town, Dongguan City, with a total investment of 380 million yuan to jointly build a liquid metal project. On August 12, the company signed a cooperative investment framework agreement with Sanxiang Xinliao, with a total investment of 60% and 40%, with a total investment of 600 million yuan, to jointly build liquid metal projects. With the expansion of industrialization, it is expected to accelerate the expansion of liquid metal applications and increase the size of the market.

Lay out the business of new energy automobile parts and grasp the development trend of new energy vehicles. According to the announcement, the company has been committed to the research and development of lightweight new materials for new energy vehicles for a long time, and has a leading research and development strength in the fields of mold research and design, new material technology and surface treatment, with more than 100 aluminum-magnesium alloy die-casting machines. it has the largest 4200T aluminum-magnesium alloy die-casting machine in the country, and the precision parts die-casting technology is the domestic leader. In the first half of the year, the company's auto parts business income was 150 million yuan, an increase of 12.65% over the same period last year. According to the announcement, as a supplier, the company has entered the supply chain of domestic and foreign well-known customers such as Tesla, Inc., BYD, Geely and LG, and is expected to further expand its market share in the future. First, the first phase of Yian Yunhai light alloy precision die casting production base project has been put into production. According to the announcement, at present, all the production supporting processes of the first phase of the Yian Yunhai project have been completed, and the die casting machine has been installed and debugged and put into production, and the second phase of construction is being started. The second is to continuously increase production capacity cooperation and further expand market share. According to the announcement, on August 26, the company signed a quadripartite cooperation investment framework agreement with Ningde Times, Sanxiang Xincai and Wanshun Group, intending to press 30%, 25%, 25%, 25%.

20% of the equity ratio jointly invested 2 billion yuan to build magnesium alloy materials projects, further increase upstream and downstream cooperation, and expand the company's market share in the field of magnesium alloys.

A breakthrough has been made in the field of biodegradable medical magnesium alloys and the industrialization has entered a new stage. The company is the pioneer in the standard-setting, clinical and industrialization of the domestic medical magnesium alloy industry. according to the announcement, the company received the clinical trial approval of medical devices issued by the State Drug Administration on July 13, marking the formal approval of the clinical trial of the company's biodegradable magnesium bone internal fixation screws, becoming the first biodegradable metal screw approved for clinical use in China, and the company's medical magnesium alloy industrialization is further. According to the company's estimate, the orthopaedic industry will have an average annual compound growth rate of about 10% and 15% in the next 10-15 years, and the market size of medical magnesium alloy materials in the orthopedic industry will reach 12 billion. The company will carry out clinical trials in the future. after successful clinical trials, the company will apply for product registration and is expected to be on the market by the end of 2020.

Zhuzhou SASAC is in charge, helping the company to accelerate product promotion. According to the announcement, Zhuzhou State Investment Corporation fully subscribed for the additional 50 million shares issued by the company in February 2018 and accepted the 45 million shares transferred by Yi'an Industrial Agreement in November 2018. At present, Zhuzhou State Investment Corporation has a cumulative shareholding of 20.64% and a voting right of 27.97%. Its 100% controlling shareholder, Zhuzhou City SASAC, has become the actual controller of the company. The entry of SASAC will provide resource support for the company's subsequent growth, and will accelerate the promotion and application of Yi'an liquid metal in Zhuzhou's general aviation industry, rail transit, new energy vehicle and other industries, resulting in a synergistic effect on the development of related business.

Give "increase-A" investment rating, 6-month target price 18.25 yuan. With the gradual release of the company's production capacity and the large-scale application of the products, we estimate that the company's return net profit from 2019 to 2021 is 0.59,1.20 and 149 million yuan respectively, and the corresponding PE is 122x, 60x and 48x respectively. Taking into account the strong technical barriers of the company and the large future market space in the company's field, the current valuation level of about 120x (PE TTM) is at the central level of nearly five years, giving the company a dynamic price-to-earnings ratio of 70x in 2020 with a six-month target price of 18.25 yuan.

Risk tips: 1) the project capacity is not as expected; 2) the downstream demand for magnesium alloy and liquid alloy is not as expected; 3) the clinical trial progress of medical magnesium alloy is not as expected.