The company's overall performance showed a steady growth trend, and orders continued to be fulfilled. The company specializes in R&D, production and sales of superconducting materials and applications, high-end titanium alloy materials, and high-performance superalloy materials. It has now become a leading domestic and internationally advanced superconducting material, superconducting magnet, high-end titanium alloy, and high-performance superalloy innovative R&D and production enterprise. The company adheres to independent innovation and targets the country's needs in major fields. Some products have reached international advanced levels and achieved domestic replacement. The company's revenue and net profit in 2018-2022 maintained a rapid growth trend. In the first three quarters of 2023, the company achieved operating income of 3,088 billion yuan, a year-on-year decrease of 5.47%, and realized net profit of 583 million yuan, a year-on-year decrease of 32.13%. The decline in performance was mainly affected by the pace of core product order delivery. As China continues to release next-generation equipment, the company's performance is expected to pick up in the next three years.
The release of equipment is expected to drive the growth of the company's titanium alloy business. The company's high-end titanium alloy products include bars, wires, forged billets, etc., and are mainly used in various core equipment fields such as aviation (including aircraft structural parts, fasteners and engine parts, etc.), ships, weapons, etc. Various new titanium alloys independently developed and mass-produced by the company have filled many gaps in China, broken the technical blockade of developed countries in Europe and the US on key titanium alloy materials for aviation, ships, and weapons, and guaranteed the supply of key materials that the country urgently needs. Some major grades of new titanium alloys have become the main titanium alloys used in China's aviation structural parts and fasteners, providing key materials for the first flight and mass production of China's new fighter jets and transport aircraft. Currently, there is still a big gap between the total volume and generation of our military aircraft and the US. The number is only 24.69% of that of the US. Structurally, there are a large number of old second-generation aircraft such as the J-7 and J-8 among our fighter jets, and the proportion of third-generation and fourth-generation aircraft is far lower than that of the US and Russia. At present, China's domestically produced advanced military aircraft, represented by the “20 series”, have entered the mass production and assembly stage, spawning massive demand for high-end titanium alloys, and the company is expected to benefit from this.
The technological advantages of superconducting materials are highlighted, and the superalloy business is developing rapidly. In terms of superconducting materials, the company's products include superconducting wires and superconducting magnets, which are mainly used in magnetic resonance imagers, magnetically controlled direct-pull monocrystalline silicon, nuclear fusion test reactors, etc. In terms of superalloys, the company mainly produces deformed superalloys, etc., which are used in key national development fields such as aero engines, gas turbines, and nuclear power equipment. At present, the quality level of the company's various grades of superalloy products meets the requirements of relevant material technical standards for high-end equipment such as domestic military aero engines and commercial aero engines. The purity, fine structure and uniformity of the alloys are good.
Investment suggestions: We adjusted our profit forecast according to the three-quarter report. We expect the company's revenue for 2023-2025 to be 47.7/64.53/7.775 billion yuan, net profit of 10.91/14.94/1,863 billion yuan, corresponding to EPS of 1.68/2.3/2.87 yuan, corresponding to PE29.91/21.83/17.51X, maintaining the “buy” rating.
Risk warning: order pace falls short of expectations, competition intensifies, profit forecasts and valuations fall short of expectations