Event: On August 16, 2023, the company released its 2023 semi-annual report. In the first half of 2023, the company achieved operating income of 1,981 million yuan, a year-on-year increase of 57.53%, a year-on-year increase of 298 million yuan, an increase of 30.04% over the previous year, and net profit of 275 million yuan after deducting non-return net profit of 275 million yuan, an increase of 25.1% over the previous year.

Revenue has increased dramatically, and R&D capabilities have been remarkable. As an enterprise in the forging industry, the company's main business includes rolling of various annular forgings, free forgings, and production of die forgings, involving various material types such as high temperature alloys, titanium alloys, aluminum alloys, stainless steel, etc., and its products are widely used in various industries such as aviation, aerospace, petrochemicals, and new energy. In terms of revenue, the company's revenue during the reporting period increased by 57.53% compared to the previous period, achieving a significant increase. This was due to sufficient orders in the current period and growth in the power and petrochemical forgings business. At the same time, the company increased its R&D efforts. R&D expenses during the reporting period were 894.086 million yuan, an increase of 69.84% over the same period last year. This is due to the company's continuous increase in product development investment in the aerospace and new energy industries. The company has established industry-university-research technical cooperation and exchange platforms with many universities and research institutes, giving full play to the role of the scientific research capabilities of relevant universities and research institutes, further strengthening the company's R&D capabilities, and giving full play to the company's autonomous activism in carrying out cooperative topics with many universities, so that the company's R&D technology has been further improved. At present, the company has obtained 82 patent authorizations, including 46 invention patents, ranking among the top in the industry.

Focus on the forging industry and focus on core strengths to enhance competitiveness. Since its establishment, the company has always focused on the forging industry. Through its own continuous capital investment, pioneering innovation, and continuous development and reserve of customer resources, and at the same time, under the joint impetus of key advantages such as equipment, technology, and quality, it has now become one of the high-end enterprises that produce ring forgings in the industry. In terms of equipment advantages, the company has introduced advanced production equipment from abroad through continuous capital investment, so that the company has production capacity for large, special-shaped, high-end and large-scale industrial metal forgings; in terms of technical research and development advantages, the company has mastered many core technologies such as overall precision rolling technology and full-process numerical simulation technology for special-shaped section rings, and has strong technical R&D and manufacturing capabilities; in terms of quality system and supplier qualification certification advantages, the company has established a strict quality management system. It has established a strict quality management system for new product introduction, process development and testing, production management, inspection and risk management, etc. The process has established strict quality control procedures to ensure that the company's products meet relevant international and domestic industry standards and customer requirements. The company enhances its core competitiveness by focusing on its own advantages according to local conditions, which is conducive to promoting the growth of performance and consolidating and enhancing its original position.

Policies promote a favorable development environment, and the industry will enter a high boom cycle. The company is mainly engaged in forging business, and its products are used in aviation, aerospace, nuclear power and new energy industries. In the field of new energy, the “14th Five-Year Plan” is a critical period for the clean, low-carbon transformation and high-quality development of energy in China. In the future, new energy storage equipment will be developed on a large scale. The company will also focus on key research and development of ring parts for equipment in the new energy industry to promote differentiated production guided by market demand and customer demand. In the aviation sector, as the C919, a single-channel large jet airliner with independent intellectual property rights, obtained airworthiness certification and moved into the engineering development stage, the aero engine market rapidly expanded, the industry entered a boom cycle, and terminal demand is expected to grow steadily, which will drive the development of aviation materials and forgings. In the petrochemical sector, as the global petrochemical industry enters a period of deep adjustment, developed countries have continuously raised green barriers and gradually restricted the production and use of products with high emissions and high environmental risks. Government departments have begun to attach great importance to environmental pollution caused by the chemical industry, actively promote energy saving and emission reduction, promote clean production and a circular economy, and have successively introduced a number of industrial policies to encourage the development of environmentally friendly petrochemical industries. The hunter-related industries covered by the company have many policy dividends, and the development environment is good, and the company is expected to achieve performance growth in these fields.

Investment advice: The company is a leading enterprise in the field of forging, with many core technologies and leading products. According to model estimates, it is estimated that the company's net profit for 2023-2025 will be 637 million yuan, 829 million yuan, and 1,062 million yuan respectively. The corresponding EPS will be 5.26 yuan, 6.84 yuan, and 8.77 yuan respectively, and PE will be 20.5 times, 15.7 times, and 12.3 times, maintaining the “increase in holdings” rating.

Risk warning: industry competition increases risk; raw material risk; technical risk; environmental risk.