This report is read as follows:

Zhongzhou Special Materials is a leading private superalloy enterprise, the company ploughs the petroleum and petrochemical market, and has a significant competitive advantage. With the rapid growth of production capacity, the continuous promotion of import substitution and the continuous optimization of product structure, we expect the company's performance to increase steadily.

Main points of investment:

For the first time, the company was given an "overweight" rating. We predict that the return net profit of the company from 2023 to 2025 is 1.00,1.58 and 194 million yuan, respectively, and the corresponding EPS is 0.43, 0.68 and 0.83 yuan, respectively. With reference to similar companies, the company is valued at 40 times PE in 2023, corresponding to the target price of 17.2 yuan. Coverage for the first time, giving a "overweight" rating.

Civil superalloy leader, the industry barrier is high, the growth exceeds the market expectation. The market believes that the company's gross profit margin is low and the competitive advantage is not obvious, but we believe that the company's civil superalloy industry has high barriers to technology entry, long verification cycle, and the company's gross profit margin is in the upper-middle level of the industry. The optimization of the company's product structure and overseas business efforts will lead to a rise in gross profit margin. With the continuous increase in production of the company's Jiangsu project, the company's growth will exceed expectations.

The commissioning of new projects has led to a continuous increase in the company's output. The company's existing production capacity exceeds 4000 tons, and the second phase production capacity of Jiangsu New Zhongzhou under construction will more than double the existing cast superalloy production capacity, and its third phase project will lead to a further increase in production capacity. The commissioning of the second and third phases of Jiangsu New Zhongzhou Company will lead to an increase in the company's output. In addition, Jiangsu New Zhongzhou is positioned as a high-end product, and it is expected that the company's product structure will be further optimized and the company's profitability will increase after it is put into production.

There is a broad demand space for civil superalloys. Civil superalloys are widely used in nuclear power, petrochemical, new energy and other fields. Nuclear power accounts for about 5% of China's electricity generation, and 20% of it is far away from overseas. In the field of petrochemical industry, the application of superalloy is more and more extensive from oil and gas drilling and production at the upper end to coal chemical industry and fine chemical industry at the lower end. In the field of energy, the demand for superalloy such as steam turbine in China is gradually increasing. The industry space of high temperature corrosion resistant alloy is broad, and it is expected that it will continue to rise in the future.

Risk hint: the production progress of new capacity is not as expected, and the risk of market development.