This report is read as follows:

The company's results exceeded expectations in the first three quarters of 2023. The localization of auto parts and the rise of domestic cars drive the demand for fine blanking special steel. The company's Anhui plant was built as scheduled, and the company's performance is expected to be gradually released after it is put into production.

Main points of investment:

Maintain the "overweight" rating. In the first three quarters of 2023, the company achieved revenue of 947 million, up 7.1% from the same period last year, and achieved a net profit of 137 million, up 38.83% from the same period last year. The forecast of the company's 2023-25 homing net profit is RMB 1.87 billion (RMB 1.66), and the corresponding EPS is RMB 2.777). With reference to similar companies, the company will be valued at 20 times PE in 2023, raising the company's target price to 50 yuan (formerly 44.22 yuan) and maintaining a "overweight" rating.

Profitability continues to improve, and downstream demand continues to boom. The company's sales volume in the first half of the year is about 67000 tons. Assuming that the company's sales volume in the third quarter is half of that in the first half of the year, it is estimated that the average selling price and gross profit per ton in the first three quarters of 2023 are 9425 yuan and 2376 yuan per ton, respectively, an increase of 409,429 yuan per ton compared with 2022. Downstream demand is stable, the company has sufficient orders on hand, and sales are expected to be slightly higher in the second half of the year than in the first half of the year.

The long-term development plan is clear, and equity incentives inject vitality. The company has an annual production capacity of about 140000 tons in 2022. According to the record sheet of the company's investor relations activities, the commissioning of the Anhui plant will drive the company's production capacity to 200000 tons in 2025 and 300000 tons in the long term. The company has completed the restricted stock incentive in September 2023, which is mainly awarded to backbone personnel with a price of 17.93 yuan. The scope of equity incentive is wide, which can further stimulate the business vitality of the company.

The barrier to entry of the industry is high, and the demand space for fine blanking special steel materials is broad. The heat treatment and rolling processes of different fine blanking special steel materials are different and the product performance is highly consistent, the certification time of downstream automobile manufacturers is longer, and the barriers to enter the industry are higher. The fine blanking special steel material for automobile bicycles in our country is 12kg, while the overseas bicycle consumption is about 20kg, and the import substitution market is relatively large, so the demand increment space for fine blanking special steel in the automobile field of our country is still large.

Risk hint: the demand for cars has fallen sharply, and the prices of raw materials have fluctuated greatly.