The company is a global leader in amorphous alloys, and demand for downstream amorphous transformers is growing steadily. The introduction of amorphous motors may become the company's next rapid growth point. The second and third business nanocrystalline alloys and magnetic alloy powders also have great potential for development.
The world leader in the amorphous alloy industry, and revenue and profit continue to grow at a high rate. The company is a mixed ownership enterprise controlled by China Aero Engine Group Co., Ltd., a military central enterprise. It specializes in the three major materials and product lines of amorphous alloys, nanocrystalline alloys, and magnetic alloy powders. It is widely used in the fields of power distribution, new energy vehicles, wireless charging, new infrastructure, nuclear power, medical and aerospace, etc., and has now become the world's largest amorphous strip production base with an annual production capacity of 100,000 tons. In recent years, the company's revenue and profit have maintained steady and high growth. In the first three quarters of 2023, the company's revenue was 1.03 billion yuan, up 26.51% year on year; net profit to mother was 227 million yuan, an increase of 89.32% year on year. Among them, amorphous alloy strips and their products were the company's main source of revenue and profit.
The policy promotes the penetration of amorphous transformers. Amorphous strips and flat iron cores are the twin engines of the company's performance growth. Compared with silicon steel transformers, amorphous transformers have outstanding energy saving and environmental protection characteristics such as “energy efficiency in manufacturing, energy efficiency in use, and energy recycling”, and can mainly be used on distribution terminals and user terminals. (1) Distribution transformers: The penetration rate of amorphous transformers of the State Grid and China Southern Power Grid is expected to rise from about 25%/45% in 2021 to about 45%/65% in 2025, respectively, with an increase of about 20%. (2) User-side transformers: They have been gradually put into use in rail transit, data centers, new energy and other fields. Amorphous alloys can also be used as 3C screen materials. We expect China's amorphous alloy strip demand CAGR of 20.6% in 2021-2026. The company used “low-flow melt precision continuous casting technology” as the core technology to achieve large-scale industrialization of amorphous alloys, and successfully developed amorphous three-dimensional coil core technology. The raw material was scrap steel instead of industrial pure iron, continuously reducing costs and increasing efficiency.
Furthermore, the company has a high-quality customer base and continues to explore the international market. The main customers are distributed in India, South Korea, Vietnam and other countries, and it has established long-term partnerships with companies such as China National Grid, Oaks, Japan's Toshiba, and ABB.
Build nanocrystals and magnetic powder platforms to continuously optimize product structures. Nanocrystalline strips are mainly used in power electronic components. With their performance advantages, they are expected to gradually replace traditional ferrite materials and accelerate penetration in emerging fields such as wireless charging and new energy vehicles. The company leads the market in the thinness of nanocrystalline strips, and the 5,000-ton fund-raising project can further increase profitability. In the magnetic powder sector, the company has made breakthroughs in preparation methods, reduced product costs and improved performance. It has entered the photovoltaic field and obtained the supplier qualification of Sunshine Power, one of the mainstream manufacturers.
The amorphous motor market has broad prospects and may become the company's next rapid growth point. Amorphous alloys have excellent comprehensive electromagnetic properties. They can replace unoriented silicon steel sheets in stator cores, reduce motor iron loss, and become a new choice to break through motor power density bottlenecks. (1) In the field of new energy vehicles: GAC Aian launched the world's first “nanocrystalline - amorphous” ultra-efficiency motor, which can reduce motor core loss by 50%, and the maximum efficiency reaches 98.5%.
As a supplier of GAC Aian, the company is currently actively deepening the development of amorphous materials for the application of motors under mobile loads represented by new energy vehicles. (2) Robotics field: Amorphous alloys can be used in servo motors to improve motor efficiency and reduce joint load. The company will focus on the development and processing of related materials.
First coverage, giving a “Highly Recommended” investment rating. The company's net profit due to mother in 2023-2025 is estimated to be 329, 3.68, and 411 million yuan, respectively, and the corresponding PE is 21.5, 19.2, and 17.2 times, respectively.
Risk warning: Downstream demand falls short of expectations, penetration rate of new materials is lower than expected, and secondary market fluctuations.