Performance summary: in the first half of 2023, the company achieved operating income of 180 million yuan (year-on-year-22.6%), net profit of 37.92 million yuan (year-on-year-32.4%), net profit of 33.56 million yuan (year-on-year), and corresponding basic EPS of 0.44 yuan. Among them, the company Q2 achieved revenue of 101 million yuan (year-on-year-21.7%, month-on-month + 27.0%), return-to-mother net profit of 21.54 million yuan (year-on-year-26.0%, month-on-month + 31.4%), and the basic EPS for a single quarter is 0.25 yuan. Carbonyl iron powder leading enterprises, broad downstream application space: since its establishment in 2004, the company has always focused on the field of micro-nano metal powder new materials. the main business includes carbonyl iron powder, atomized alloy powder and soft magnetic powder based on two kinds of materials, metal injection molding feed, wave-absorbing materials and so on. Due to the shortcomings of carbonyl iron powder, such as high process barriers, difficulty in production process control and high production cost, the market share of carbonyl iron powder in domestic iron-based powder remained between 1.5% and 2.1% from 2015 to 2020. At present, the company's carbonyl iron powder products have reached more than 25% of the domestic market, occupies a leading position in the subdivision track, and competes with the German chemical giant BASF in the global market. The downstream of the company's products cover consumer electronics, automotive industry, diamond tools, energy storage power stations, aerospace and other terminal consumer fields. the products can also be applied to near-net molding technologies such as powder metallurgy (including MIM) and 3D printing. Customized parts are obtained from flexible production, and then expand the scope of application of downstream parts products.

The unit price of the product is disturbed by raw materials and demand, and a small boat has sailed through the mountains: 2023H1's revenue dropped by 22.6% compared with the same period last year, mainly due to: ① is affected by macroeconomic pressure, and product sales are under pressure due to the slowing demand for the upgrading of wearable devices, mobile phones and other consumer electronic products. ② atomized alloy powder accounted for a relatively high proportion of high-priced cobalt-chromium series powder in the same period last year. As customer demand shifted to iron-based series powder with lower unit price, the unit price of the product decreased by 85% compared with the same period last year. Although the sales of atomized alloy powder products increased by 47% year-on-year, the revenue of this part of the product still decreased by 78%, a decrease of 72.86 million yuan. From the point of view of the downstream demand structure, despite the weak demand in the downstream consumer electronics market, inductor components in automotive, server and other fields have a strong demand for ultra-fine particle powder and high temperature resistant powder. at the same time, precision parts such as folding screen hinges have an urgent demand for high strength steel and light steel powder products. The company responded immediately according to market changes, through breakthroughs in emerging application fields such as automotive electronics and folding screen hinges. Partly offset the decline in consumer electronics demand. 2023Q2's revenue increased by 27.0% month-on-month, mainly due to the small revenue base of ① 23Q1 due to the impact of consumer electronics customer orders, and the increase in ② 23Q2 product sales. We expect that the upcoming mobile phone launch boom in the second half of the year is expected to lead to a recovery in consumer electronics, thus boosting the demand for hinges, electronic components and upstream related powders. Q2 profitability stabilized and rebounded: 2023H1's gross profit margin was 37.3% (year-on-year + 3.04pcts). The increase was mainly due to the increase in gross profit ratio of carbonyl iron powder and MIM feed products with high added value, while the prices of coke, cobalt, nickel and other raw materials fell year-on-year. The net profit rate of 2023H1 sales is 21.0% (year-on-year-3.51pcts), which deviates from the change of gross profit margin due to the sharp increase in expense rate during the main period. 5.06pcts is mainly affected by the increase in management expense rate (year-on-year + 4.22pcts), mainly due to the recognition of managers' share-based payment fees, as well as the increase in business activities and intermediary fees. The gross profit margin of 2023Q2 is 37.4% (month-on-month + 0.19pcts), which is mainly due to the improvement of the profitability of many products due to the recovery of demand. The net profit rate of 2023Q2 sales is 21.2% (month-on-month ratio + 0.43pcts). The relative increase of net interest rate is mainly due to the sharp decrease of 4.30pcts during the Q2 period, in which the decrease of financial expense rate is mainly due to deposit interest income and loan discount. Production capacity planning is clear, and it is expected to greatly increase the market space: at present, the company has an annual production capacity of about 13000 tons of micro-and nano-metal powder products. IPO fundraising projects "annual output of 6000 tons of carbonyl iron powder and other series of products project (phase I)" and "high-performance ultra-fine metal and alloy powder expansion project" are expected to reach production in September 2023, carbonyl iron powder production capacity will increase by 6000 tons to 11200 tons. The production capacity of high-performance ultra-fine metal and alloy powder will be expanded by a total of 4000 tons, and the near-doubling capacity expansion will further strengthen the company's leading position in the subdivision industry. The company announced in June 2023 that it plans to invest no more than 3 billion yuan. On the basis of the "demonstration line project for the production of carbonyl iron powder with an annual output of 3000 tons of innovative technology", the company has invested in Ningxia to build a "project with an annual output of 100000 tons of metal soft magnetic micro-nano powder". The construction period of the project is 36 months, and it is planned to put into production of 3000 pounds, 27000 pounds, 70 in 2029, respectively. Annual production capacity of 1000T carbonyl iron powder (calculated that the CAGR of capacity expansion in 2022-2029 is about 55%). Based on the company's many years of process technology and experience, the project plans to reduce the price of the basic carbonyl iron powder from the current 40,000 yuan / ton to about 20,000 yuan / ton on the premise of keeping the product 40% + gross profit margin. On the one hand, the low-cost carbonyl iron powder scheme can directly partially or completely replace the lower performance competitive products such as electrolysis and atomization, thus entering a new application field, on the other hand, the penetration breadth and depth of carbonyl iron powder in the existing application field can be improved, and the ceiling of market capacity of carbonyl iron powder is expected to increase exponentially in the future.

Investment suggestion: as a leading manufacturer of carbonyl iron powder in China, the innovation of low-cost carbonyl iron production process is expected to open up an index-level incremental market space for products, with the expansion of product capacity and the development of market application space in the future. the company's high growth ability is worth looking forward to. From 2023 to 2025, we estimate that the company will achieve operating income of 4.14 yuan 5.86 / 777 million yuan respectively, an increase of-3.1% / 41.3% / 32.7% year-on-year, and a net profit of 0.90 pm / 41.3% / 32.7%, respectively, with a year-on-year increase of-9.0%, 45.9%, 36.3%, corresponding to PE40X/28X/20X. Cover for the first time, giving a "buy" rating.

Risk tips: a sharp rise in raw material prices, project production schedule is not as expected, downstream demand is not as expected, downstream application expansion is not as expected, and so on.