Introduction to this report:
The company's performance for the first half of 2023 was in line with expectations. The company is actively developing new markets and customers to hedge against the decline in consumer electronics demand. Fund-raising projects have been implemented steadily, the cost reduction process continues to advance, and production and performance are expected to be steadily released.
Key points of investment:
Maintain the “increase in holdings” rating. The company achieved net profit of 38 million yuan in the first half of 2023, a year-on-year decrease of 32.36%. The company's performance was in line with expectations. Maintain the company's EPS forecast for 2023-25 at 1.56/1.93/2.09 yuan, and the corresponding net profit to parent is 133/165/179 million yuan, respectively. Considering the decline in valuation levels of companies in the same industry, referring to similar companies, the company was given a valuation of 40 times PE in 23 years, lowered the company's target price to 62.4 yuan (originally 69.69 yuan), and maintained the “increase in holdings” rating.
Develop new customers and markets, and continue to invest in R&D. The company continued to invest in research and development, carried out process optimization work for ultra-fine inductor powders, which are in short supply downstream, and increased the output rate of ultrafine powders. In the context of declining demand for consumer electronics, the company is developing in fields such as automobiles and servers. The company has completed the development of materials such as high-strength steel and lightweight steel, and achieved new breakthroughs in the field of consumer electronics structural parts.
In the field of soft magnetic functional parts, the company's related powder materials have entered the relevant supplier list. Relying on its own technical advantages, the company actively develops new products, meets new downstream needs, and continuously strengthens its main business.
The fund-raising project is expected to be implemented, and the production capacity of carbonyl iron powder has ushered in an increase. The company's “A series of product projects with an annual output of 6000 tons of carbonyl iron powder” and the “high-performance ultra-fine metal and alloy powder expansion project” are expected to be put into operation in September 2023. After the project is put into operation, the company's carbonyl iron powder production capacity and alloy powder production capacity will further increase. It is expected that the company's metal powder production will rise from 2023-2024.
Breakthroughs have been made in key cost reduction processes, and there is broad scope for the future. By using low-content iron sources to replace high-purity iron, the company achieved a breakthrough in the carbon iron powder cost reduction process. On the one hand, the products produced by this innovative process can partially or completely replace competitors with lower performance such as electrolysis and atomization, and expand new application fields. On the other hand, it can increase existing downstream demand. The cost reduction process opens up space for the company to grow in the future.
Risk warning: Newly built production capacity falls short of expectations, and consumer electronics demand continues to decline.