Introduction to this report:

The company's performance for the first half of 2023 was in line with expectations, with strong downstream demand and rapid growth in the company's revenue. The construction of the subsidiary Jiangsu Xinzhongzhou continues to advance, and we expect the company's profits to continue to be released in the future.

Key points of investment:

Maintain ratings to increase holdings. The company achieved revenue of 518 million yuan in the first half of 2023, an increase of 42.57% over the previous year, and achieved net profit of 48 million yuan, an increase of 29.34% over the previous year. The company's performance was in line with expectations. Maintaining the company's forecast of EPS of 0.43/0.68/0.83 yuan for 2023-2025, corresponding net profit to parent would be 1.0/188/194 million yuan, respectively. Maintain the company's target price at $17.2 and maintain the “increase in holdings” rating.

Downstream demand is booming, and revenue is growing rapidly. In the first half of 2023, the company achieved revenue of 259 million yuan and 158 million yuan respectively for deformed superalloys and cast superalloy products, with year-on-year increases of 63.03% and 53.29% respectively. In the context of a boom in downstream demand, the company's main product revenue is growing rapidly. Among them, the gross profit margin of cast superalloy products was 24.04%, up 3.88 percentage points from the previous year, and the company's product structure continued to improve. The company's construction of Jiangsu Xinzhongzhou continues to advance. It is expected that after the project is implemented, the company's revenue will continue to grow.

Jiangsu Xinzhongzhou continues to advance, and production capacity is expected to gradually increase. The company is a leading civil superalloy enterprise, with a production capacity of over 4000 tons. The subsidiary's Jiangsu Xinzhongzhou Phase II project has brought about a two-fold increase in casting superalloy production capacity. Subsequent phase III projects will further increase the company's production capacity. Jiangsu Xinzhongzhou's product positioning is high-end. It is expected that after production is put into operation, the company's product structure will also be further optimized, and the company's profitability will follow suit.

The scale of the civil superalloy industry continues to grow. Civilian superalloys are mainly used in nuclear power, petrochemicals, new energy and other fields. In the petrochemical field, its application fields are becoming more and more extensive, from upper end oil and gas drilling to lower end coal chemicals, fine chemicals, etc.; in the energy sector, demand for superalloys such as steam turbines is gradually rising. The scale of the civil superalloy industry is expected to continue to grow.

Risk warning: The commissioning of new production capacity falls short of expectations, and market development risks.