Based on high-end titanium alloys, breaking foreign monopolies. High-end titanium alloys produced by the company include bars, wire, forged billets, etc., which are mainly used in aviation, ships, weapons, etc. Various new titanium alloys independently developed and mass-produced by the company have filled many gaps in the country and broken the technical blockade of key titanium alloy materials used in China's equipment by developed countries in Europe and the United States. Titanium alloy is one of the main structural materials for military aircraft and engines. Advanced domestic military aircraft, represented by the “20 Series”, have entered the mass production and installation stage, which is expected to generate a large demand for titanium alloy. At the same time, with the recovery of the civil aviation industry and further localization and application of large domestic aircraft, the company is expected to continue to benefit as a mainstream supplier of titanium. In recent years, the titanium alloy business has been the company's largest source of revenue. In 2023, the company's titanium alloy production volume remained at a high level, and sales volume declined, mainly due to changes in order rhythm. As military orders are further implemented in the next two years, the company's titanium alloy products will be gradually delivered.

Superconducting wires have high technical barriers and are widely used downstream. The company is currently the only commercial manufacturer of low temperature superconducting wires in China, and is currently the only full-process manufacturer of niobium-titanium bars, superconducting wires, and superconducting magnets in the world. The company has successively broken through a full set of large-scale superconducting magnet winding, curing and low temperature Dewar design and manufacturing technology. The products are widely used in fields such as semiconductors, rail transit, large-scale national scientific projects, and R&D and production of new materials. The preparation process of low temperature superconducting wires involves a variety of key technologies, and the preparation cycle is long, and there are many processes and quality control points. Currently, apart from the company, domestic enterprises have almost no technology accumulation. In terms of high-temperature superconducting materials, the company focuses on the development and industrialization of MgB2 and Bi-2223. It has now mastered the core preparation technology of these materials, and will expand their application in fields such as transmission cables and liquid-free helium magnet equipment in smart grids in the future.

Superalloy production and sales reached a record high year on year, and production capacity continued to expand. The multi-type superalloy project being developed by the company is progressing smoothly. In the aero engine market, the company has broken through mass production technology for more than ten grades of superalloys and obtained relevant grade supply qualifications; in the aero engine market, the φ600mm large-size GH4738 bars produced by the company have passed a certain type of engine component assessment; in the gas turbine market, the large GH4169 bars produced by the company have completed forging verification and evaluation and obtained supply qualifications. In 2021, the company plans to raise capital for the industrialization of high-performance metal materials for aerospace. After delivery, the production capacity of superalloys will be increased by 1,500 tons/year. With the orderly release of the company's superalloy production capacity and the scale effect, the profitability of the superalloy business is expected to improve further.

Investment advice: We adjusted the profit forecast according to the company's latest situation. We forecast that the company's 2024-2026 revenue will be $54.41/73.45/8.506 billion yuan respectively, net profit to mother will be 10.96/15.79/1.82 billion yuan, corresponding EPS is 1.69/2.43/2.8 yuan, corresponding to PE22.28/15.47/13.42X, maintaining the “buy” rating.

Risk warning: orders fall short of expectations, price changes, profit forecasts and valuations fall short of expectations