With the development of the double main industry of "advanced basic materials + new military materials", the new production capacity will be put into operation soon. The company is a leading enterprise of copper plate and strip in China, with an output of 300000 tons in 2021, with a market share of 13.16%, ranking first. The output of copper conductors and copper alloy wires is 300,000 tons and 50,000 tons, which is also in a leading position in the industry. In 2020, the company raised investment to build 80,000 tons of plate, strip and foil, 300000 tons of high-end copper conductors and 20,000 tons of high-precision copper alloy wire projects to develop high value-added products. It is expected that the new production capacity will be completed and put into production by the end of 2022. In 2015 and 2018, the company acquired Tingli Technology and Skybird Hi-Tech respectively, entered the high-end thermal equipment and carbon fiber material industry, raised 480 tons of aircraft carbon brake preform and 650 tons of carbon fiber thermal field preform project, expanded preform production capacity, and established Wuhu Skybird in 2020 to expand downstream of the industrial chain. The company is in a leading position in a number of sub-areas, production capacity is about to enter an intensive put-in period, product structure is further optimized, is expected to achieve both volume and price rise.

Copper processing fees are expected to hit bottom and rebound, and the high utilization rate of scrap copper adds to the cost advantage. Due to the perfectly competitive market environment, long-term low gross profit margin and tightened environmental protection and dual control policies, the production capacity of the copper processing industry is accelerating, and the market concentration is gradually increasing. Take the copper strip industry as an example, the CR10 has reached 52.92% in 2021, and the industry's leading voice and bargaining power has improved. At the same time, copper processing fees are at the bottom of history, with little room for decline. The company's copper-based materials business is expanding to high gross margins and high value-added products, and about 10% of its low-end production capacity may be replaced every year to enhance product profitability.

Taking into account the industry trend and the upgrading of its own product structure, we believe that the company's copper processing fees are expected to hit bottom and rebound; take the company as an example, for every 100 yuan / ton of processing fees, the company's net profit will increase by about 65 million yuan, an increase of about 14.64%. The scrap copper utilization rate of 65.48% of the company is also in the forefront of the industry, considering that the price difference of copper fine waste has been above 1500 yuan / ton for a long time, the company's raw material cost advantage is prominent, thickening the company's profit space.

The new energy sector contributes a considerable increase in copper demand, and the company's copper-based materials business may benefit. In recent years, the demand of traditional copper downstream industry has stabilized; in contrast, the demand for copper in new energy vehicles, wind power and photovoltaic is growing rapidly. Take cars as an example, each traditional car consumes copper 23kg, while each pure tram consumes up to 83kg. According to forecasts, by 2025, photovoltaic, wind power, new energy vehicles and charging piles will contribute 1.984 million tons, 887300 tons, 1.4112 million tons and 83500 tons of copper demand respectively. The company's precision copper strips and high-end copper conductors can be widely used in new energy vehicles, wind power and photovoltaic fields.

The company realizes the exclusive supply of military carbon fiber preform with high certainty of performance growth. Since the acquisition in 2018, Skybird's high-tech performance has continued to grow, with revenue of 599 million yuan in 2021, an increase of 49.84% over the same period last year. Gross profit margin has been maintained at 45-50%, 480t aircraft carbon brake preform, 650t carbon fiber thermal field preform phase I and II have been put into production and are in the capacity climbing period. After full production in 2023, the company's production capacity will reach about 1700 tons (about 1000 tons for military products and 700tons for civilian products). The company's military carbon fiber preform mainly includes special-shaped preform and military aircraft brake disc preform. The core competitiveness of the company's military business lies in: 1) remarkable technological advantages, with a number of exclusive patents, complete military production qualifications, and cooperation and complementarity with top science and technology to form the synergy advantage of the industry chain. 2) the military order cycle is long, in order to ensure security and continuity, suppliers are generally not easily changed, and there is a certain dependence on suppliers in subsequent technological improvements and upgrades. The company has cooperated with the military for many years and has the first-mover advantage. 3) the number of military aircraft in China has reached 3285, and the second-generation aircraft accounts for a relatively high proportion (46.75%). The demand for replacement of carbon brake disk and installation of new aircraft is considerable. China's defense expenditure has increased year by year, reaching 1.379544 trillion yuan in 2021, an increase of 6.8% over the same period last year and 1.21% of GDP. There is still room for growth. To sum up, we believe that the company has built solid industry barriers, making it difficult for new entrants to enter; in the short term, Skybird's new performance will be linked to the progress of production capacity; in the long run, performance is expected to continue to grow with the expansion of the market space of the military industry.

The market space of carbon / carbon thermal field composites is broad, and the company's products have obvious competitive advantages. The company set up Wuhu Skybird in 2020 to enter the carbon / carbon thermal field composite materials, the project is divided into three phases, the first phase has a production capacity of 400t, is expected to be put into production in September 22, the second and third phases of the project are scheduled to start construction in 23 years, and the future production capacity will reach 1500 tons. The global installed capacity of photovoltaic has increased steadily. Under optimistic circumstances, the installed capacity of photovoltaic is expected to reach 2255.6GW in 2025, with a new installed capacity of 396.8GW. With the continuous improvement of the photovoltaic industry and the increase in the market share of superimposed carbon-based thermal field components, we predict that the demand for carbon / carbon thermal field composites will reach 7038.4 tons by 2023. The synergy advantage of the company's industrial chain is obvious. compared with the enterprises in the same industry, the self-produced carbon fiber preform brings about 28% extra profit space, and the "gas phase + liquid phase deposition method" also makes the product high density, uniform material and longer service life. Due to the rapid production capacity of enterprises in the industry, the industry pattern may turn to the balance of supply and demand or even oversupply, coupled with the trend of large size of silicon wafers, higher requirements for product performance and quality; when the industry moves towards stock market competition, the company's product quality is better, the price elasticity is more sufficient, and is more likely to win in the market competition.

Dingli science and technology performance back to the growth track, independent listing is just around the corner. Dingli Technology is a leading domestic high-end thermal equipment enterprise, after the completion of the relocation, break the original capacity bottleneck, production and operation back to the right track.

In 2021, revenue and profits totaled 314 million yuan and 97.5014 million yuan, up 83.4% and 222.99% respectively over the same period last year. Thanks to the substantial increase in demand for photovoltaic crucibles, the demand for related thermal equipment of the company increased significantly, and the order on hand was in good condition. The company has accumulated technology, has a strong reserve of talents, and has the ability to undertake the domestic replacement of new materials, and has successfully conquered the preparation process of the third generation semiconductor precursor material-high purity toner. At present, the company is actively preparing for listing, has launched the second round of financing, spin-off listing is expected to usher in substantial progress.

Investment suggestion: the company is the leader of copper processing industry, and it is also the exclusive supplier of military carbon fiber preform in China and expands into the field of photovoltaic thermal field materials. with the release of production capacity and the optimization of product structure, it is expected to achieve a simultaneous increase in volume and price. The company's revenue is expected to reach 520.41 yuan, 727.87 yuan and 83.411 billion yuan in 2022-2024, the net profit of returning to the mother is 7.11,9.15 and 1.02 billion yuan respectively, and the EPS is 0.53,0.69,0.76 respectively. Maintain a "buy" rating.

Risk hints: lower processing fees, weaker macro environment, shrinking downstream demand, lower-than-expected project schedule