The high-end titanium alloy faucet is expected to create another brilliance under new historical opportunities. Titanium alloy is one of the important structural materials for high-end equipment such as aircraft fuselages, engines, and ships. Beginning with the 14th Five-Year Plan, the titanium alloy industry ushered in rapid demand expansion dividends brought about by the upgrading and iteration of major equipment. As a leading high-end titanium alloy leader, Western Superconductor has industry-leading capabilities in developing oversized, ultra-high-strength bars. In addition to traditional fields, the company's titanium materials have also made remarkable progress in the fields of military and civil aviation, helicopters, marine engineering, nuclear, etc., have obtained supply qualifications for various models, and are gradually being delivered in batches of products. The company is actively improving its production capacity layout. As the downstream sector continues to expand due to the boom, combined with excellent management capabilities, the company's profit level is expected to continue to rise.
There is broad scope for import substitution of deformed superalloys, and product volume has led the company into the second growth curve. The release of aviation equipment has led to an increase in demand for supporting aviation. Combined with the attributes of engine consumables, the demand for installation+replacement+maintenance is huge. The performance of aviation power depends largely on the performance of high-temperature end parts. The development of high-performance superalloys has always been one of the shortcomings of the domestic aviation development industry. Currently, only a few companies have mass production capacity, and there is a huge gap between supply and demand. The company began engineering research on superalloys in 2014, using an internationally advanced triple melting process to prepare high-purity, high-uniformity, and high-stability deformed superalloy products. A number of key types of Hangfa superalloy materials have begun to be supplied in batches. At the same time, the company has undertaken a number of aero-engine superalloy development tasks, contributing core growth to future business.
The only commercial manufacturer of low temperature superconducting wire in China, MRI+MCZ+CFETR resonance-driven growth. Superconducting materials refer to materials with zero DC resistance and complete resistance to magnetism under certain conditions. The establishment of Western Superconductivity stemmed from the international ITER project and is the only domestic enterprise with commercial production capacity for low temperature superconductors. In the short term, the potential for superconducting wires for MRI in China is large, and domestic manufacturers are gradually replacing domestic products; in the medium to long term, along with the rapid development of the photovoltaic and semiconductor industries, domestic substitution plus energy efficiency under carbon neutralization have spawned huge demand for superconducting magnets for MCZ. The company has supplied bulk quantities of superconducting wires for MRI to GE and SIEMENS, and has achieved batch export of conduction-cooled MCZ. At the same time, with the launch of the domestic CFETR project, the company's superconducting business is expected to usher in a stage of rapid growth that resonates with the downstream economy.
We forecast the company's EPS for the period 23-25 to be 1.21, 1.93, and 2.53 yuan respectively. Referring to the 24-year average PE valuation of comparable companies, 31 times the PE valuation, corresponding to the target price of 59.83 yuan, we gave it a “buy” rating for the first time.
Risk warning
Military order delivery and revenue recognition fall short of expectations; risk of raw material cost fluctuations; capacity investment falls short of expectations; gross margin increase falls short of expectations