Event: On March 3, 2023, Beimo Hi-Tech and Suotong Development signed a cooperation agreement to jointly develop the application of carbon carbon and carbon/ceramic composites in lithium battery anode materials and electrolytic aluminum industries. The form of cooperation is the establishment of a joint venture company, where the company's shares account for 60%. In terms of division of business, the company is mainly responsible for the technical development, manufacture and manufacture of large components of C/C and C/Si composites. Suotong Development is mainly responsible for product sales based on its rich experience in producing pre-baked anodes and serving electrolytic aluminum customers.

As an aeronautical brake faucet supplier, the company has deep research and manufacturing experience in the field of composite materials. Since 2003, the company has taken the lead in developing composite brake discs in China. After nearly 20 years of development, brake discs with C/C and C/C/SiC composites as the main raw materials now have a leading position in the military machinery market. At the same time, in terms of technology, the company has also become the first domestic enterprise to master C/C composite materials from prefabricated weaving technology to rapid deposition processes with all independent intellectual property rights. In the field of civil aviation, the company pioneered domestic replacement of C/C composite brake discs with the high reliability of its products. In January '22, the company signed an aviation materials supply agreement with Hainan Airlines to enter the supply chain system for civil aviation aircraft aviation materials replacement, demonstrating the company's competitiveness in the carbon-carbon composite brake disc field compared to overseas leaders.

Strong alliances complement each other's strengths, and a second growth curve can be expected. Beimo Hi-Tech's original carbon/carbon and carbon/ceramic material technology is highly compatible with the field of anode materials. It can provide stable quality and good consistency of carbon/carbon and carbon/ceramic composite components in the lithium battery graphitization process. As a leading pre-baked anode company, Suotong Development has obvious advantages in the integrated layout of anode materials. Before '21, the company's revenue scale was mainly dependent on downstream military aircraft inventory replacement+new aircraft installation. The compound revenue growth rate in 2015-2020 reached 29.27%. As the company completed the acquisition of Shaanxi Lantai in early '21 and entered the civil aviation aircraft circuit, civil brake landing gear began to take off. As the company enters the lithium battery materials field, it is expected to start a second growth curve, which will drive an increase in the share of revenue from the non-military products business.

With their comparative advantages in terms of specific heat capacity, etc., silicon-based composites will gradually replace traditional graphite carbon materials in the long run. Anode materials are divided into two categories: carbon and non-carbon. Carbon materials, mainly artificial/natural graphite, occupy the main market share due to their high safety and low cost. According to GGII data, graphite materials in China accounted for 98% of total anode shipments in '21. Since the gram capacity of graphite materials has been applied to the theoretical limit, it is expected that new high-capacity anode materials, mainly silicon-based anodes, will be the future development direction. Currently, mainstream silicon-based anode technology routes include SiO/C and Si/C composites. According to SPIR data, global lithium battery shipments in '22 were 948.1 GWh, and are expected to reach 2344 GWh in '25, with a CAGR of 35.22%. Assuming that the unit consumption of anode materials is about 1.2 kg/kWh, and the penetration rate of composite materials reached 4% in 25, it is estimated that the global demand for composite anodes reached 1.125,500 tons in 25, and the market space is broad.

Investment advice: The application of composites in anodes is still in its infancy, and the penetration rate is low. As an aviation brake leader, the company has many years of experience in composite material R&D and manufacturing.

Through a strong alliance with Suotong, a leader in pre-baked anodes, it is expected to create a second growth curve. We expect the company's revenue for 2022-2024 to be 1,23/15.78/1,966 billion yuan respectively, net profit of 472/588/736 million yuan respectively, corresponding EPS of 1.71/2.13/2.67 yuan respectively, and corresponding PE of 27.05/21.74/17.37 respectively, giving it a “buy” rating.

Risk warning: The growth rate of military spending falls short of expectations; research and development progress of composite anode materials falls short of expectations, etc.