Zhongzhou Special Materials: The country's leading manufacturer of high temperature corrosion resistant alloys. The comprehensive advantages of the company's high temperature corrosion resistant alloy products are obvious, and they have the advantages of complete supporting services in the industrial chain. The company's main products are cast high temperature corrosion resistant alloys, deformed high temperature corrosion resistant alloys, special alloy welding materials, etc., and has many high-quality downstream customers. In 2023, H1 had operating income of 518 million yuan, an increase of 42.6% over the same period, and net profit of 48.36 million yuan, an increase of 29.3% over the same period

Demand in various fields is rising, and there is broad room for growth of superalloys. The size of the superalloy market in China and the world continues to expand. Demand for superalloys in China is increasing year by year, and there is still a large gap between supply and demand. Demand for downstream applications of superalloys continues to increase: (1) Petrochemical industry: The downstream petrochemical industry is developing rapidly, and refining demand is rising. Investment in petrochemical and chemical industry equipment is increasing year by year, and the refining and chemical equipment market is huge. In 2022, the total investment in domestic petrochemical industry equipment reached 2303.41 billion yuan, an increase of 15.3% over the previous year; the scale of the refining and chemical special equipment market has continued to expand in recent years, boosting market demand for high-temperature corrosion-resistant alloys. (2) Nuclear power industry: Nuclear power generation is rising steadily. The total global power generation of nuclear reactors in 2021 was 2653 TWh. China's share of nuclear power accounted for 5% of the world, and nuclear power generation continued to rise. (3) Automobile industry: Automobile production is increasing year by year, and the turbocharger configuration rate will be further increased, promoting an increase in demand for automotive high temperature corrosion resistant alloys. (4) Environmental protection industry: In 2021, China's environmental protection equipment market reached 390.56 billion yuan, an increase of 3.07% over the previous year. The development of the environmental protection industry will bring new demand for environmentally friendly superalloys.

Mainly engaged in valve products, accurately positioned the high-end field of civilian use, and highlighted its advantages. The company's production capacity will be further expanded, and the IPO project and the Jiangsu Xinzhongzhou project will continue to advance. (1) Valve products are the company's core products, have a strong customer and technical base, and provide valve products for many high-end downstream customers. (2) The company's products are mainly used in the civilian field to effectively avoid homogenized competition.

Profit forecast and valuation: As the company's production capacity continues to expand and demand in downstream applications increases, the company's high-temperature corrosion-resistant alloy sales volume is expected to increase significantly. The company's 2023-2025 revenue is expected to be 10.77/12.95/1,571 billion yuan, respectively, and net profit of 1.06/1.37/190 million yuan, corresponding to PE28.39/21.85/15.80 times lower than the average of comparable companies, PE31.41/22.73/17.26 times lower than the average of comparable companies. For the first time, coverage was given a “buy” rating.

Risk warning: the company's production capacity expansion falls short of expectations; demand in downstream petroleum, petrochemical, nuclear power and other industries falls short of expectations; increased industry competition exceeds expectations