Introduction to this report:

The company's 2023 results exceeded expectations. The company seizes the boom opportunities of downstream demand, actively adjusts the product structure, and increases the proportion of high-margin product structures. The company actively explores the field of bearing applications, and the company's room for growth is further expanded.

Key points of investment:

Maintain an increase in holdings rating. The company achieved revenue of 1,353 billion yuan in 2023, up 11.69% year on year, and achieved net profit of 210 million yuan, up 42.2% year on year. The company's performance exceeded expectations. The company's 2024-25 net profit forecast was raised to 237/282 million yuan (originally 207/230 million yuan), and the net profit forecast for 2026 was increased to 327 million yuan, corresponding EPS to 2.99/3.56/4.13 yuan. Maintain the company's target price of 50 yuan and maintain the “gain” rating.

Demand is booming, and sales continue to rise. In 2023, automobiles accounted for 83.75% of the company's downstream demand. In '23, China's automobile production was 30.1132 million vehicles, up 9.3% year on year, and the company's downstream demand continued to rise.

In 2023, the total sales volume of the company's metal products was 167,700 tons, up 19.57% year on year. The company seized the opportunity of the industry boom, leveraged its price and service advantages, and continued to expand its scale.

Open up new fields and adjust the product structure. Due to good downstream demand and the rapid growth of orders from some customers, the company optimized the order structure. In '23, the company's gross profit per ton was 2,136 yuan/ton, an increase of 188 yuan/ton over the previous year, corresponding to a net profit of 1,249 yuan/ton per ton, an increase of 199 yuan/ton over the previous year. In the medium to long term, the company has entered the core customer industry chain in the bearing sector. The company's fund-raising production capacity will focus on the high-end stamped bearing field. The company's downstream will gradually expand into high-speed rail, aviation, robotics and other application fields, and overall profitability will continue to improve.

The fund-raising project is about to be implemented, and production is expected to gradually rise. The company has a production capacity of about 160,000 tons in 2023. The fund-raising plant project in Anhui is expected to be completed by the end of 2024, and it is expected to release 40,000 tons of production capacity in 2025. The total production capacity of the company's fund-raising projects is 150,000 tons. After delivery, the company's production capacity will reach 300,000 tons, and the company's output is expected to grow steadily.

Risk warning: Demand for automobiles has declined sharply, and raw material prices have fluctuated greatly.