Having been deeply involved in high-end heat transfer aluminum plate and foil materials for more than ten years, it has become the “vanguard” in the field of segmentation: the company established the direction of aluminum heat transmission at the beginning of its establishment in 2008, has accumulated over ten years, completed the “Shanghai+Chongqing” layout in 2017, and became one of the top ten aluminum foil enterprises in China in 2018, ranking first in the country with a production scale of 135,000 tons in the aluminum heat transmission market, ranking first in the country, becoming the “vanguard” of the subdivision circuit.

In 2022, the company plans to add 150,000 tons of high-end aluminum sheet and foil projects for new energy vehicles. After production is put into operation, the production capacity is expected to exceed 500,000 tons. The company's revenue in 2016-2022 increased from 2.23 billion yuan to 8.54 billion yuan, and the CAGR was 25.1%. From a performance perspective, net profit returned to the mother in 2016-2022 increased from 170 million yuan to 670 million yuan, and the CAGR was 25.7%, and the development was steady.

Industry output is growing steadily, and demand for new energy heat treatment can be expected to be elastic: 1) Supply-side aluminum plate and foil industry has excess capacity, with production capacity of 23.96 million tons in 2022 (yoy -10%), yet from an output perspective, steady growth. The competitive pattern may be continuously optimized. The production of aluminum sheet and foil production in 2022 was 9.95 million tons (yoy +2%), and the CAGR in 2019-2022 was 13%, steady growth, and the demand side is expected to be very flexible. As of August 2023, the current production and sales ratio of aluminum sheet and foil is 77% in history, which is currently 77% of the three years in history The 80th quartile level confirms that the conduction and digestion of demand for aluminum sheets and foils is improving. Combined with the deep decline in the previous period, the recovery is more flexible; 2) China's aluminum sheet and foil export demand is good, and export regions are scattered, reflecting strong product competitiveness. In 2022, China's aluminum sheet and foil exports were 5.03 million tons, accounting for 51% of total output; import regions are concentrated, mainly from South Korea and Japan, where products are more high-end; 3) Demand estimation: The use of aluminum heat transmission materials in traditional bicycles is 10kg/vehicle, and the usage of new energy vehicles has doubled. We estimate that the global and Chinese aluminum composites used in 2025 will be 125/500,000 tons, the global and China 2022-2025E CAGR will be 8.4%/11.6% respectively, and 2023-2025E will drive the average annual demand of 112/46 million tons.

“Good product+sufficient production capacity” is a win-win quality, and “imported equipment automation+high quality customer stickiness” creates a core barrier: 1) High-end aluminum heat transmission product series are rich, yield is high, and premium ability is strong. The company's products are of high quality. In 2022, the company became the seventh batch of single champion demonstration enterprises in the manufacturing industry. Up to now, there are only 4 champion demonstration enterprises in the aluminum plate and foil industry. Currently, the company's product yield is 72%, which is superior to the theoretical yield of 70%. Compared with Yinbang's shares, which also uses aluminum brazing composites, the competitive advantage is remarkable. Comparatively, the gross margin of the company's foreign products in 2022 was 19%, higher than the average of 3pct, and the gross margin of domestic products was 11%, higher than the average of 0.5pct, and remarkable premium capacity. 2) The company's industrial scale advantage is obvious. As of 2022, the company's production base in Shanghai had an annual output scale of 140,000 to 150,000 tons, and the annual production scale of the Chongqing production base was 200,000 tons, resulting in a total production capacity of 34-350,000 tons/year, ranking in the top three positions in the industry compared to comparable domestic listed companies. 3) Foreign equipment investment+automation significantly reduces costs and increases efficiency. The company introduced foreign equipment to improve the flatness and cutting quality of rolled plates to ensure stable production of high-quality products while reducing costs and increasing efficiency. In 2022, the company's tonnage sales price was 24,000 yuan/ton, which is at the leading level in the industry. In 2021-2022, the company's tonnage cost continued to be lower than the average of comparable companies, and the company's tonnage cost in 2022 was 21,000 yuan/ton, the lowest among comparable companies. 4) Abundant domestic and international sales channels, won wide recognition from global customers, and high quality customers have strong stickiness. The company has set up four major domestic offices to adopt a direct sales model, and the international market is expanded by adopting direct sales as an auxiliary method. Currently, customers include well-known auto parts manufacturer DENSO, Germany's Mahler Group and Korea's Hanang Group, as well as mainstream heat exchange manufacturers in the new energy sector, Sanhua, Yinlun, and Nabaichuan. The company's product quality and comprehensive strength have been widely recognized.

Profit forecast and investment rating: We expect the company's 2023-2025E EPS to be 1.0, 1.4, and 1.6 yuan/share, respectively, and the corresponding PE is 17/12/11 times, respectively. Based on the company's stable position in the leading position of aluminum heat transfer materials, it was covered for the first time, and a “buy” rating was given.

Risk warning: macroeconomic fluctuations cause sales to fall short of expectations; risk of declining profitability due to fluctuations in raw material prices and falling processing costs; market risk caused by international trade friction; risk of exchange rate fluctuations, etc.