Huawei's second-generation upgraded folding screen phone Mate Xs uses zirconium-based liquid metal + MIM process, which is expected to create a popular application scene for the commercialization of liquid metal and open up room for growth. First, Huawei's second-generation upgraded folding screen phone MateXs uses zirconium-based liquid alloy as the main hinge system material to improve strength. On the evening of February 24, Huawei released the second-generation upgraded folding screen phone MateXs, which officially revealed that MateXs's hinge system has more than 100 devices and uses materials such as zirconium-based liquid metal to greatly improve the hinge strength, which is 30% stronger than titanium alloy. Second, the hinge is the most critical functional component of the foldable mobile phone, and it is also the most high-tech part of the folding screen. The hinge design can effectively prevent the excessive mechanical damage of the screen, compared with the high specification of the laptop rotating shaft, which determines the success or failure of the folding screen mobile phone. Because of the high demand for materials, Huawei II folding screen finally chose the zirconium-based liquid metal material with outstanding performance, which is combined with metal injection molding (MIM), which has the advantages of high precision and thinner, and is expected to replace the traditional stamping + CNC mode. Third, liquid metal has the characteristics of high strength, high hardness, light and thin, complex and bright, which makes it highly adaptable. Liquid metal is a new generation of subversive materials that surpass traditional light alloys such as aluminum, magnesium and titanium. At present, although the material has great potential in 3C, automobile, medical and other fields, the market space has just begun to open. Huawei's second-generation upgraded folding screen phone Mate Xs chooses zirconium-based liquid metal + MIM process to create a popular application scene for the commercialization of liquid metal and expand the growth space.

Yi'an Science and Technology is the global leader in the industrialization of liquid metal field, with a large-scale production line of zirconium-based amorphous alloys, and the ability to develop and produce liquid metal mobile phone hinges. 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 to apply liquid metal in the automotive industry. The company began research and development in 2012 and mass production of bulk amorphous in 2018. With the gradual expansion of the application scene, the market space is large. First, the company's liquid metal products have cooperated with relevant customers in the fields of 5G communications, new energy vehicles, 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 established cooperative relations with customers such as Tesla, Inc., Samsung, Lance Technology, ABB, etc. According to the Ian Technology periodic report, the company has always had a good cooperation with Huawei, and the company also develops and produces liquid metal hinges. 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, 2019, the company's wholly-owned subsidiary Yi'an liquid Metal 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 March 6, 2020, the company signed a project cooperation investment agreement with Sanxiang Zirconium magnesium, the industrial fund of Sanxiang New Materials, to jointly invest 40%, 60% of the amorphous alloy (liquid metal) project, with a registered capital of 100 million yuan. With the expansion of industrialization, it is expected to accelerate the expansion of the application field of liquid metal and enhance the market scale.

The business of die-casting magnesium alloy grasps the spring tide of new energy, and the industrialization of medical magnesium alloy has entered a new stage. The company has long been committed to the research and development of new energy vehicle lightweight new materials, as a supplier has entered the supply chain of domestic and foreign well-known customers such as Tesla, Inc., BYD, Geely, LG, and cooperated with Yunhai Metal, Ningde Times and other companies to expand market share. In addition, the company is the pioneer of standard setting, clinical and industrialization in the domestic medical magnesium alloy industry. on July 12, the company received the clinical trial approval for medical devices issued by the State Drug Administration, which became the first biodegradable metal screw approved for clinical use in China. after clinical success, it is expected to be put on the market by the end of 2020.

Give a "buy-A" investment rating. Considering the gradual release of the company's production capacity and the accelerated demand for folding mobile phones, the company's performance has improved steadily. We expect the company's return net profit from 2019 to 2021 to be 1.02,1.32 and 163 million yuan respectively, corresponding to 76x, 58x and 47x, respectively. Considering that the company has strong technical barriers in liquid metal, biological magnesium alloy and other areas, and has great market potential in the future, it is expected to enjoy a higher valuation premium and give a "Buy-A" investment rating.

Risk tips: 1) liquid metal-related market demand and commercialization promotion are lower than expected; 2) biological magnesium alloy industrialization is lower than expected; 3) traditional aluminum-magnesium alloy business orders are lower than expected.